Real Estate Investment Trusts (REIT) applicable to almost the 229 million sq. ft. of office space available in India. The experts point out that half of this space may be listed in the next few years. If this happens then the total REIT listing could be worth Rs 1.25 trillion, as per JLL India estimates. The private equity funds such as Blackstone, Brookfield, Singapore’s GIC and the Canada Pension Plan Investment Board (CPPIB) are expected to be the first ones to go in for REITs.
REITs are expected to be successful in the Tier-I cities as there are more open spaces. In 2016, the government had removed a major hurdle in the path of REITs that is the Dividend Distribution Tax (DDT). In addition, the rules of REITs are relaxed a bit now as the investment cap in under-construction projects is raised from 10% to 20%. REITs have the potential to attract institutional and retail investors alike because of its inherent nature to provide regular dividends at relatively low-risk levels. REITs result in a twice-yearly dividend.
REITs have the capacity to attract retail investors in India; actually, REIT-compliant projects are mostly office buildings or shopping malls. There are two types of real estate investment trusts: equity REITs and mortgage REITs. Most of the REITs are equity REITs such as apartment buildings, offices or shopping centers.
Recently six institutional investors that include Japan’s NikkoAm StraitsTrading Asia and the US’ North Carolina Fund have received SEBI approval to invest in India as developers and real estate investors under REITs. The commercial office space private equity inflows are expected to continue throughout the remaining months of 2018.
Earlier commercial space in top cities like Delhi-NCR, Mumbai, Pune, Hyderabad, Kolkata, Bengaluru and Chennai are already in trend. Now it is seen that commercial spaces are available in smaller as well as tier II and tier III cities.