India’s Small and Medium REITs Market to Exceed USD 60 Billion by 2026: CBRE Report
New Delhi, India – The potential market size for Small and Medium Real Estate Investment Trusts (SM REITs) in India is projected to surpass USD 60 billion by 2026, according to a report by real estate consulting firm CBRE South Asia Pvt. Ltd.
Market Potential
CBRE estimates that the potential market for SM REITs in India includes over 300 million sq. ft. of completed commercial office space, with an additional 50 million sq. ft. expected to be completed by 2026. This growing interest in SM REITs is expected to significantly impact India’s commercial real estate landscape.
Current and Future Office Stock
India currently has over 800 million sq. ft. of completed office stock, with REIT-listed office inventory at over 88 million sq. ft. Mumbai leads with 75 million sq. ft. of SM REIT-ready office stock as of June 2024, and an additional 10+ million sq. ft. expected by 2026. Delhi-NCR follows with 70+ million sq. ft., Bengaluru with 50+ million sq. ft., and Hyderabad with 30+ million sq. ft. These cities are expected to add 36 million sq. ft. of SM REIT-worthy stock by 2026. Pune, Kolkata, and Chennai have 25+ million sq. ft. of completed supply and are expected to add 14 million sq. ft. over the next two years.
Importance of SM REITs
Anshuman Magazine, Chairman and CEO of CBRE for India, Southeast Asia, Middle East, and Africa, highlighted the significance of the SM REITs framework. He stated that SM REITs enhance transparency, offer robust investor protections, and redefine portfolio diversification. This framework mitigates risks associated with under-construction projects and ensures steady returns through mandatory quarterly distributions, making real estate a more accessible and secure investment option.
Future Prospects
Building on the success of traditional REITs and InvITs, which have accumulated Rs 1.3 trillion in asset value over the past four years, SM REITs offer immense promise. They provide opportunities for price discovery and exit strategies for investors in smaller, high-occupancy assets. By pooling such assets, SM REITs can improve property upkeep, ESG compliance, and tenant profiles, contributing to a more organized and efficient real estate ecosystem.
Tax Benefits
The Union Budget 2024-25’s decision to reduce the holding period for long-term capital gains on listed business trusts from 36 to 12 months aligns these instruments with listed equity shares. This tax parity is expected to enhance the appeal of SM REITs as an investment vehicle.
Doubts Revealed
REITs -: REITs stands for Real Estate Investment Trusts. They are companies that own, operate, or finance income-producing real estate. People can invest in REITs to earn money from real estate without having to buy property themselves.
USD 60 Billion -: USD 60 Billion means 60 billion US dollars. It’s a way to measure a large amount of money. In Indian rupees, it would be a very big number, showing how valuable the market is.
CBRE -: CBRE South Asia Pvt. Ltd. is a company that provides real estate services. They help people buy, sell, and manage properties and give advice on real estate investments.
300 million sq. ft. -: 300 million sq. ft. means 300 million square feet. It’s a way to measure large areas, like buildings or land. One square foot is about the size of a small tile on the floor.
Mumbai, Delhi-NCR, Bengaluru, and Hyderabad -: These are major cities in India. Mumbai is the financial capital, Delhi-NCR is the national capital region, Bengaluru is known for its tech industry, and Hyderabad is a major IT and business hub.
transparency -: Transparency means being open and clear about what is happening. In business, it means that companies share important information so that everyone knows what is going on.
investor protections -: Investor protections are rules and measures to keep people who invest their money safe. They make sure that investors are treated fairly and their money is not misused.
portfolio diversification -: Portfolio diversification means spreading out investments across different types of assets. This helps reduce risk because if one investment does poorly, others might do well and balance it out.