India's SM REITs market value likely to exceed USD 60 billion by 2026: Report
Sep 5, 2024, 16:27 IST
The potential Small and Medium Real Estate Investment Trusts (SM REITs) market size in India is expected to exceed USD 60 billion by 2026, real estate consulting firm CBRE South Asia Pvt. Ltd said in a report.
As per CBRE estimates, the potential market for SM REITs in India is over 300 million sq. ft. of completed commercial office space, with an additional 50 million sq ft expected to be completed by 2026.
The forecast reflects a growing interest in SM REITs, which are expected to play a key role in shaping the future of India's commercial real estate landscape.
The total completed office stock in India currently stands at over 800 million sq. ft., out of which REIT-listed office inventory is recorded at over 88 million sq. ft.
Furthermore, according to the report, Mumbai recorded the highest potential SM REIT-ready completed office stock of 75 million sq. ft. as of June'24, with around 10+ mn. sq. ft. of upcoming supply by 2026.
Delhi-NCR recorded a completed SM REIT-ready potential stock of 70+ mn. sq. ft., followed by Bengaluru with 50+ mn. sq. ft. and Hyderabad with 30+ mn. sq. ft., as per the report.
It is estimated that cumulatively Delhi-NCR, Bengaluru and Hyderabad could add an additional supply of potential SM REIT-worthy stock of 36 mn. sq. ft. by 2026.
Other cities such as Pune, Kolkata, and Chennai recorded 25+ mn sq. ft. of completed supply as of June'24.
It is estimated that Pune, Kolkata, and Chennai would cumulatively record additional supply of potential SM REIT-worthy stock of 14 mn. sq. ft. over the next two years.
The report underscored the importance of the SM REITs, saying that the newly-introduced framework represents a significant step forward for India's fractional ownership landscape.
"By enhancing transparency and offering robust investor protections, SM REITs are set to redefine portfolio diversification. This framework will not only mitigate risks associated with under-construction projects but will also ensure steady returns through mandatory quarterly distributions, making real estate a more accessible and secure investment option for a broader range of investors."
Building upon the success of traditional REITs and InvITs, which, according to the Reserve Bank of India, have cumulatively accumulated Rs 1.3 trillion in asset value in the past four years, SM REITs hold immense promise, the report said.
It said they offer the potential to unlock price discovery and exit opportunities for investors in smaller, high-occupancy assets.
By pooling such assets, SM REITs can drive improved property upkeep, ESG compliance through potential retrofitting, and an enhanced tenant profile.
Moreover, the Union Budget, 2024-25's decision to reduce the holding period for determining long-term capital gains on listed business trusts--REITs and InvITs -- from 36 to 12 months aligns these instruments with listed equity shares, the report said.
This tax parity is expected to bolster the appeal of SM REITs as an investment vehicle, it added.
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As per CBRE estimates, the potential market for SM REITs in India is over 300 million sq. ft. of completed commercial office space, with an additional 50 million sq ft expected to be completed by 2026.
The forecast reflects a growing interest in SM REITs, which are expected to play a key role in shaping the future of India's commercial real estate landscape.
The total completed office stock in India currently stands at over 800 million sq. ft., out of which REIT-listed office inventory is recorded at over 88 million sq. ft.
Furthermore, according to the report, Mumbai recorded the highest potential SM REIT-ready completed office stock of 75 million sq. ft. as of June'24, with around 10+ mn. sq. ft. of upcoming supply by 2026.
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It is estimated that cumulatively Delhi-NCR, Bengaluru and Hyderabad could add an additional supply of potential SM REIT-worthy stock of 36 mn. sq. ft. by 2026.
Other cities such as Pune, Kolkata, and Chennai recorded 25+ mn sq. ft. of completed supply as of June'24.
It is estimated that Pune, Kolkata, and Chennai would cumulatively record additional supply of potential SM REIT-worthy stock of 14 mn. sq. ft. over the next two years.
The report underscored the importance of the SM REITs, saying that the newly-introduced framework represents a significant step forward for India's fractional ownership landscape.
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Anshuman Magazine, Chairman and CEO, India, Southeast Asia, Middle East, and Africa, CBRE, said the introduction of the SM REITs framework marks a pivotal moment for India's commercial real estate sector."By enhancing transparency and offering robust investor protections, SM REITs are set to redefine portfolio diversification. This framework will not only mitigate risks associated with under-construction projects but will also ensure steady returns through mandatory quarterly distributions, making real estate a more accessible and secure investment option for a broader range of investors."
Building upon the success of traditional REITs and InvITs, which, according to the Reserve Bank of India, have cumulatively accumulated Rs 1.3 trillion in asset value in the past four years, SM REITs hold immense promise, the report said.
It said they offer the potential to unlock price discovery and exit opportunities for investors in smaller, high-occupancy assets.
By pooling such assets, SM REITs can drive improved property upkeep, ESG compliance through potential retrofitting, and an enhanced tenant profile.
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This could ultimately contribute to a more organised and efficient real estate ecosystem with a stronger asset profile, the report mentioned. Moreover, the Union Budget, 2024-25's decision to reduce the holding period for determining long-term capital gains on listed business trusts--REITs and InvITs -- from 36 to 12 months aligns these instruments with listed equity shares, the report said.
This tax parity is expected to bolster the appeal of SM REITs as an investment vehicle, it added.