Unlike Western REITs, Indian ones provide a special mix of growth chances and steady dividend parts. The whole world of Real Estate Investment Trusts, or REITs, has changed a lot since the first one started trading in America back in 1961. As of December 2022, there are over 893 public companies named REITs across the whole world. And their total worth on the stock market is about $1.9 trillion in value. In the past 30 years, a type of investment called REITs has increased. It grew from just two countries with 120 options to include 893 in total and cover more than many others worldwide – about forty-one! Asia, especially, has been a big part of this increase. The number of REITs in the area has grown by 58% since 2015.
India also accepted the REIT market as a type of asset. Of offices that cover over 700 million square feet, around 394 msf of these can become a real estate investment trust (REIT). This will allow big future REIT offerings. Good tenants, high occupancy rates, and strong yearly leasing of about 40 million square feet, along with the steady increase in rental prices, make these office buildings more attractive. The four successful Indian REITs have got the attention of worldwide investors. They see potential in this market and want to invest, too.
An important part of the Indian REIT scene is its big unused potential. Now, only about 10% of India’s total Grade A office spaces are part of REIT. This shows there is a lot more room to grow bigger. Grade A office spaces have been the main focus in real estate, but recent changes like introducing retail REIT tell us about possible growth into other areas. Such as logistics and touring hotels give new options for people who invest money and those involved with REITs.
Unlike their Western buddies, Indian REITs bring a special mix of growth chances and regular payouts. The strong basics of workplaces there power the rise in money worth and payments for offices in India. In the old days, businesses bought their own offices to use. But now, tech firms and worldwide captive centers would rather rent top-class office spaces with many extra features, changing how we think about business real estate. The coming of big money from Private Equity funds, Pension plans, and Sovereign wealth have offered builders the cash they need. This changes their work on “Build then sell” to now being more like “Build yet rent out,” which ensures plenty of future things for a REIT can happen in real estate investment areas. It’s estimated that about INR 50-60,00 crore of business real estate is being built annually in India.
As India’s money grows, local businesses are becoming a strong new force for office spaces in the years to come. Another important change is people moving away from crowded office spaces and choosing Grade A offices managed by institutions. To simplify things, every person in India’s big six cities has about half a square foot of office space. This is very different from the 16 square feet per person in America, or Britain, with its 6 yards, and Singapore, where people get five. The chance to grow because of making spaces less crowded is really big. During the COVID-19 pandemic, people in India are more attracted to office buildings that meet ESG standards and follow green practices. They also like these high-quality spaces because they have enough room for sharing ideas and relaxing activities.
In 2019, the India office market had a record year with the highest-ever use of space at 47 million square feet. However, two years after that, I was affected by covid virus problems. Two years of changes were left, but in 2022, there was a big comeback for renting. They had the second-highest demand to use space at -36 million square feet, which shows how much they want office place. In India, the use of office spaces is very important. This big country has problems with buildings and space to live in at home but needs safe places where people can work together more often.
Changes made by regulators have been really important in getting more regular people involved with REITs. Actions like decreasing the amount you can buy or sell to just one unit have greatly improved how REITs flow. This makes them easier for everyone. By August 2023, there will be over 200,00 unitholders who invest in the four REITs. However, this number is still not big when we think of the 30 million mutual fund investors in India.
In the whole world, REITs are known as an asset group that gives high profits in the long run. In India, the group that has things to invest in is still very new. Many people who want to put their money somewhere don’t know how good it can be for them. The four Indian trusts that do real estate, known as REITs, have recently started a group called the Indian REIT Association (IRA). This is done to help grow and improve the area of their business related to property in India. The IRA will work closely with SEBI, the main REIT regulator. They will support both business and investor interests while following the rules set by them.
In the world of Indian REITs, two major problems are influencing where things go. At first, removing the ‘SEZ’ status can help fill empty spaces. This could lead to more rental income and make it easier for REITs (Real Estate Investment Trust) to grow. This helps bring in extra tax money, too. Next, work on including REITs in local stock lists like international practices do. This can help increase money flow and build more trust among those who invest in these tools.
the fast change of REITs around the world, with an increase in India’s market for them shows good things to come for the commercial buildings sector here. As REITs in India get more powerful, they will help local and global investors. They can all make profits with this kind of investment option.
