Potential small and medium REITs market in India likely to exceed $60 billion by 2026: Report

Mumbai recorded the highest potential SM REIT-ready completed office stock of approximately 75 mn sq ft as of June 2024, with around 10-plus million square feet of upcoming supply by 2026. Delhi-NCR recorded a completed SM REIT-ready potential stock of over 70 mn sq ft, followed by Bengaluru with more than 50 million square feet and Hyderabad with 30-plus million square feet.

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According to the consultant’s estimates, the potential market for SM REITs in India is over 300 million square feet of completed commercial office space, with an additional 50 mn sq ft expected to be completed by 2026. “The forecast reflects a growing interest in SM REITs,” the report noted.

As per CBRE, the total completed office stock in India currently stands at over 800 mn sq ft, out of which REIT-listed office inventory is recorded at over 88 mn sq ft.

Regional contribution

It is estimated that cumulatively, Delhi-NCR, Bengaluru and Hyderabad could add an additional supply of potential SM REIT-worthy stock of approximately 36 mn sq ft by 2026, the report said.

Building upon the success of traditional REITs and InvITs, which, according to the Reserve Bank of India, have cumulatively accumulated ₹1.3 lakh crore in asset value in the past four years, SM REITs hold immense promise, the report said.

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Fractional ownership permits individual investors to co-own commercial or residential assets as an alternative investment. Properties can be acquired through special purpose vehicles or through private limited companies.

The Securities and Exchange Board of India (SEBI) in March 2024 established a regulatory framework for small and medium real estate investment trusts (SM REITs) through amendments to the SEBI (Real Estate Investment Trusts) Regulations, 2014.

It brought fractional ownership platforms within the regulatory framework as a subclass within the REIT regulations for assets valued between ₹50 and 500 crore.

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“The alignment of SM REITs with recent tax reforms under the Union Budget 2024-25 is a game-changer for the investment landscape. Reducing the holding period for long-term capital gains will make SM REITs more attractive and accessible, driving increased participation and further institutionalizing the market,” said Rami Kaushal, Managing Director, Consulting and Valuation Services, India, Middle East and Africa, CBRE.