Publicly listed REITs and InvITs in India have distributed over ₹30,000 crore to their unitholders since their inception over 5 and 7 years respectively
Bengaluru, 5 June 2024: The Indian REITs Association (IRA) and Bharat InvITs Association (BIA) are collaborating to enhance the understanding among investors regarding Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) in the Indian financial landscape. This collaboration represents the first partnership between these two associations, aimed at educating investors and promoting the adoption of REITs and InvITs, strengthening the operating and regulatory environment, deepening the capital markets, and increasing investor awareness, among others.
REITs:
The Indian REIT market has demonstrated noteworthy growth with ₹1,40,000+ crore in gross Assets Under Management (AUM), market capitalization of over ₹85,000 crore, and a portfolio covering 115 million square feet (MSF) of Grade A office and retail space nationwide.
In just five years, REITs have distributed more than ₹17,000 crore, surpassing the Entire NIFTY Realty Index combined distribution, and have raised over ₹25,900 crore of equity capital through primary issuances, including initial listings and follow-on offerings.
India currently has ~400 MSF of REIT-able office space and ~70 MSF of REIT-able retail space, out of which only ~100 MSF and ~10 MSF, respectively, are part of Indian REITs. This showcases a tremendous growth opportunity in the REIT asset class in India.
InvITs:
Since their introduction in the Indian market, InvITs have showcased remarkable growth and have played a pivotal role in democratizing infrastructure ownership in the country. InvITs own and operate infrastructure assets across various sectors like roads, transmission lines, telecom towers, fibre cables, warehousing, renewable energy etc. They provide an opportunity for investors, with varying quantum of investment capacities, to invest in income-generating infrastructure assets through a regulated and transparent platform.
Currently, India has 4 publicly listed and 14 privately listed InvITs. Cumulatively, they manage assets worth ~₹5 lakh crore and have raised ~₹1.1 lakh crore in equity since 2019. The 4 publicly listed InvITs have a combined market capitalization of ~₹27,500 crore and have over ~1.7 lakh unitholders (as on 31st March 2024) – a manifestation of investor trust in India’s long term infrastructure asset play.
InvITs have emerged as a highly regulated, safe and transparent investment vehicle providing an opportunity to investors to participate in the country’s infrastructure growth story. With stringent regulations governing InvITs, they operate with high quotient of corporate governance and provide superior risk-adjusted returns to its unitholders. Having showcased a strong performance trajectory, InvITs have the potential of adding over ~₹20 lakh crore (BIA estimates) in their AUM over the next decade.
Speaking at the event, Indian Reits Association (IRA) said: “Currently, REITs represent 14% of the total market capitalization of the Indian Real Estate portfolio, with a current base of 230,000 unitholders, pointing at a huge opportunity for growth. As we focus on various initiatives to enhance education and awareness, we are proactively collaborating with governmental authorities to secure classification as equities. This classification would facilitate index inclusion, attracting passive flows into REITs, and boosting liquidity, stimulating increased trading activity. Moreover, categorizing REITs as equities would enable their inclusion in ETFs or equity mutual funds, fostering greater liquidity and broader acceptance of this investment instrument.”
Bharat InvITs Association (BIA) said: “InvITs have been prevalent across developed economies since many years and their introduction in the Indian market has opened-up new vistas of portfolio diversification for investors. Given government’s focus on massive infrastructure projects, the sector is poised to grow at rapid pace in the coming years. With the value proposition InvITs offer, they provide an excellent opportunity for all investor classes to tap into this segment.”
BIA and IRA, have together been collaborating with regulators and government authorities to increase the attractiveness of these platforms by lobbying for its classification as equity / equity like instrument which will bolster their liquidity on stock exchanges.
Both IRA and BIA expressed their gratitude towards SEBI and Ministry of Finance for their continuous support and guidance in the growth of REITs and InvITs sector in India.
About IRA
Evolution of REITs in India:
The journey of REITs in India commenced with the introduction of regulatory guidelines in 2014 and culminated in the public launch of REITs in 2019, with Embassy REIT’s listing. Following this, two more REITs, were listed on the Indian exchanges – Mindspace Business Parks REIT in 2020 and Brookfield India Real Estate Trust, in 2021. In May 2023, India’s first retail REIT, Nexus Select Trust, was listed.
The Indian REIT regulations mirror international REIT standards and have played a key role in facilitating the institutionalization of the Indian commercial real estate market.
Indian REITs are required to invest 80% of their portfolio in income-producing properties, pay out at least 90% of net distributable cash flow to investors semi-annually, and are limited to a conservative debt to capitalization of 49%.
Notes –
Source for ~420 msf Grade – A office stock (Colliers | REITs – gaining larger ground in Indian real estate | June 2023)
Source for over 60 msf of Grade A malls (CBRE Real Estate Market Report | November 2022)
Gross AUM as on 31 Mar’24
Market cap as of 29 May’24
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