Real Estate Investment Trusts (REITs) are poised for an exponential growth, as they are too few in India compared to global markets, said Asheesh Mohta, Senior Managing Director in Blackstone Real Estate.
“REITs are less than 1% of Indian stock markets while in the US, their share is more than 14%. IPO is the preferred fund source for assets with high development potential” he said.
Blackstone-backed Knowledge Realty (KRT), with properties across six cities, is currently in the process of an initial public offer (IPO). The KRT REIT has been paying nearly 100% dividends, higher than the SEBI-mandated 90% of distributable cash flow.
More Access, More Investors
Like mutual funds (MFs), in a REIT, money is pooled from numerous investors and the income from properties is distributed to unitholders at regular intervals. Post IPO, REITs are listed & traded on stock exchanges like equity shares. “There is active conversation in the industry and regulatory circles on broad-basing investors in REITs, including pension funds,” Mohta said, adding that these instruments are best for stable returns over time.
In March 2024, SEBI introduced the Small and Medium REIT (SM REIT) framework. This enables the listing of smaller rent-generating real estate assets, with a minimum asset size of ₹50 crore per scheme, compared to ₹500 crore for traditional REITs.
IPO Pipeline Expands
Brookfield, Embassy, Mindspace and Nexus are among the top REITs in India. REITs invest in a wide range of properties including apartments, phone towers, hotels, office buildings, data centers, warehouses, malls and cold storage. While stocks and bonds follow a business cycle of 6 years, REITs are more in sync with the movement of the real estate market that lasts for over a decade.
Bagmane Group, a leading commercial developer in Bangalore, is planning to launch a Rs 4,000 crore REIT IPO. The process is underway, with investment banks in discussions. According to industry insiders, DLF, the largest realtor in India is also planning a similar move.