Mumbai, Delhi NCR and Bengaluru are the country’s top three markets for investors seeking investment opportunities in Small and Medium REITs, according to a report. Small and Medium Real Estate Investment Trusts (SM REITs) are established in pursuit of fractional ownership in the real estate sector for small and medium investors.

Fractional ownership is a concept where multiple investors collectively own a share or fraction of a high-value asset, such as real estate, without having to buy the entire property.

SM REITs are different from conventional REITs in terms of scale and focus. SM REITs are allowed to collect funds starting from Rs 50 crore and up to Rs 500 crore from a minimum 200 investors.

The fractional ownership market in India is projected to grow over 10 times and exceed USD 5 billion by 2030, according to recent findings by a JLL – Property Share Report.

With a vast portfolio of over 328 million sq ft. of office assets valued at approximately USD 48 billion, which are considered suitable for Small and Medium REIT investment, the potential for investment in this sector is tremendous.

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Mumbai and Delhi NCR has emerged as top hotspots

The two metros of Mumbai and Delhi NCR has emerged as top hotspots for asset acquisition opportunities under the SM REIT umbrella, reveals latest data. Additionally, the tech markets display notable growth potential, with attractive investment opportunities found in well-leased mid-sized assets that fall under the scope of SM REITs.

Mumbai, Delhi NCR, and Bengaluru lead the SM REIT market, representing 73% of worthy assets in the top seven cities’ office sector, the report said.

“Mumbai presents unparalleled opportunities for SM REITs, offering a healthy mix of well-leased large and mid-sized assets ideal for acquisition by Fractional Ownership Platforms. With over 55% of the Grade A office market, equivalent to 84.4 million sq ft of assets, available and suitable for SM REITs, the investment potential reaches approximately USD 18.7 billion,” said Dr Samantak Das, Chief Economist & Head of Research and REIS, India, JLL.

The robust demand for rent-yielding assets and the presence of a professionally managed platform makes SM REITs an enticing choice for retail investors. Considering the high capital values in Mumbai, SM REITs prove to be a superior option over smaller office formats, eliminating the increased costs associated with acquiring and managing such properties,” Das said.

Securitisation of real estate assets

Kunal Moktan, Co-founder & CEO, Property Share said, “Through the SM REIT regulations SEBI has effectively introduced an entirely new asset class to the retail and institutional investor universe, continuing the march towards securitisation of real estate assets that started with REIT regulations in 2014.”

SM REITs provide a tremendous opportunity to monetize income generating assets that currently do not have access to liquidity and when paired with technology has the potential to completely transform the real estate investment landscape in the country, he added. “As the first and largest FOP platform, Property Share will try and play its part in ensuring the success of these regulations and bringing exciting investment opportunities to the market.”

Mumbai leads SM REITs

Mumbai leads with a USD 9 billion opportunity for SM REITs, followed by Delhi NCR. Both cities offer well-managed portfolios of small and mid-sized leased assets under a strata ownership model (distinct entities owning specific units within a larger development). With diverse occupier bases, Mumbai’s SBD North and Core and Fringe BKC corridors present significant SM REIT opportunities.

Gurugram dominates the Delhi NCR office segment, capturing 61% of the SM REIT market. Commercial corridors of Golf Course Extension, Golf Course Road, and MG Road present a USD 3 billion investment potential for SM REITs, indicating where such FOPs (Fractional Ownership Platforms) could explore potential opportunities.

Bengaluru is one of the most well-occupied cities in the country, with its strong tech-driven demand from both global and domestic firms. The robust office ecosystem supports the availability of a portfolio of assets that are relevant for SM REITs.

Hyderabad, propelled by its booming Grade A office stock and a strong demand from global GCCs, offers healthy opportunities for SM REITs. The market is led by assets in the Hitec and Gachibowli corridors, which account for 84% of the available potential, representing a USD 3.7 billion opportunity.

India’s fractional ownership market to grow to USD 5 billion by 2030

India’s fractional ownership market is witnessing exponential growth, with significant potential for investors in the top seven markets. Currently valued at around USD 500 million, this market is expected to surpass USD 5 billion Assets Under Management (AUM) by 2030 despite regulatory compliance challenges.

The JLL – Property Share report sheds light on the immense growth potential of India’s real estate fractional ownership market, providing valuable insights for those seeking opportunities. Mumbai, Delhi NCR, Bengaluru, and Hyderabad are leading the way in terms of investment prospects.