Blackstone and Embassy Group are all set to launch India’s first ever REIT

• Blackstone Group is partnering with Embassy Group to list their REIT, which will be operated through their joint venture- Embassy Office Parks.
  
• An REIT functions like a mutual fund and distributes income earned from various property assets. It is expected to increase the flow of funding to India’s real estate sector.
  
• The listing comes four years after the Securities and Exchange Board of India (SEBI) released regulations for the structuring and operation of real estate investment trusts.
  

It was in September 2014 when the Securities and Exchange Board of India (SEBI) first released regulations for the domestic listing and operation of real estate investment trusts (REIT). The move was a response to the growth of India’s real estate sector and the need for a specialised investment vehicle for the financing of commercial real estate transactions. An REIT, which functions like a mutual fund and distributes income earned from various property assets, is such an investment vehicle.

And now, four years later, India is all set to witness the listing of its first REIT. Blackstone Group, a US private equity firm, is partnering with Embassy Group, a Bengaluru-based real estate developer, to list their REIT, which will be operated through their joint venture- Embassy Office Parks. The companies are expecting to raise a little over ₹50 billion from investors for the trust, which was first registered in 2016, sources told ET.

The REIT will comprise 33 million sq ft of commercial space, making it one of the largest in Asia by portfolio area and is expected to record around ₹20 billion in annual revenues. The portfolio includes nearly 70 buildings and office parks in India’s major cities - Delhi, Bengaluru and Mumbai - some of which are owned by Blackstone. Around 95% of the property under the trust is already under occupation from the likes of companies like Google, IBM, Microsoft and JPMorgan, while the remaining property is still being constructed.

The launch of REIT will increase the flow of funding to India’s real estate sector, which has experienced a protracted downturn in the recent past. It will allow institutional investors - domestic and foreign - to easily make their bets on commercial property assets and give India’s real estate developers an additional source of capital.

Blackstone has fast become one of the largest private equity investors in India’s real estate landscape, with a number of well-known commercial assets like Express Towers in Mumbai’s Nariman Point, the Blue Ridge SEZ in Pune and Noida’s Galaxy Business Park. Given the high rate of annual growth on office rental space, the REIT is expected to met with strong investor demand.

While the Blackstone-Embassy REIT will be the first one, it won’t be the only one in the near term. In June, IIFL Holdings, a Mumbai-based diversified financial services firm, registered its own REIT with the SEBI. RMZ Corp, a real estate developer in South India, is also said to be planning an REIT of its own.