India’s Real Estate Investment Trust (REIT) potential remains largely untapped, with a report from global real estate firm Colliers revealing that 57 percent of existing Grade A office space in the country qualifies for REIT listing, amounting to 380 million square feet.
The majority of this REIT-eligible office stock, about two-thirds, is located in the Secondary Business Districts (SBDs) of the top six cities in India. Among these cities, Bengaluru holds the largest share of REIT-eligible stock at 25 percent, followed by Hyderabad at 19 percent. The report also projects that an additional 41 million square feet of under-construction office space will become available in the market by the end of 2023.
Compared to other regional markets, the Indian REIT market is still in its early stages, with Indian REITs’ market capitalization being less than 10 percent of that in countries like the US and Singapore. Piyush Gupta, Managing Director of Capital Markets and Investment Services at Colliers India, emphasized the significant potential for expansion in the Indian office market.
Looking ahead, the report suggests that REITs will likely expand to other asset classes such as industrial properties, data centers, hospitality, healthcare, and educational sectors.
Regarding the distribution of REIT-worthy stock, Hyderabad has the highest quantum within the SBDs with a 28 percent share, followed by Bengaluru with 24 percent. Furthermore, over 60 percent of the Grade A office stock within SBDs is considered REIT-worthy, while approximately half of the total Grade A office stock in Peripheral Business Districts (PBDs) across the top six cities is also eligible for REIT listing.
However, Central Business Districts (CBDs) have a relatively lower share of REIT-eligible stock at 10 percent, primarily due to limited new supply and the presence of older buildings.
Currently, the three listed office REITs in India collectively hold approximately 74.4 million square feet of office REIT stock, which represents around 11 percent of the total existing Grade A office stock, according to Colliers.
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