25% of office space to get listed by 2019

MUMBAI | BENGALURU: At least a quarter of India’s top-rated office space of 464 million sq ft is expected to get listed by 2019 with an estimated valuation of around $18 billion (Rs 1.2 lakh crore), according to a study.

Large institutional investors in India’s commercial real estate are gearing up to list their real estate investment trusts (REITs) and the first of these is expected in the first half of 2017, the study by real estate consultancy JLL India showed.

Once this happened, based on the percentage of listed Grade-A office space, India’s REIT market is expected to surpass all other established Asia-Pacific markets, including Australia, Singapore, Hong Kong, Malaysia and Japan.

“While the industry expects anywhere between 25% and 100% of the Grade-A office space in India to get listed under REITs, we believe expecting anything above 25% is more optimistic than rea listic. Even 25% of the office space listing under REITs is higher than what is seen across APAC,” said Shobhit Agarwal, managing director-capital markets at JLL India.

Singapore’s REIT market comes clo sest to India’s lowest expected percentage at 19%, followed by Australia (13%), Hong Kong (11%), Malaysia (8%), New Zealand (4%) and Japan (3%). However, most of these markets are already mature and by value are much bigger than India’s potential REIT market.

“As the Indian REIT market matures and its size expands, we expect the percentage to align with that of mature markets,” JLL said in its report.

With REITs, commercial developers would be able to get funding through equity, instead of depending on high-interest debt for funding needed during the under-construction stage. Recent relaxations in investment rules allow REITs to invest in under-construction assets as well.

“The biggest benefit that I envisage REITs bringing in for commercial real estate developers is the substantial amount of liquidity it will bring in for developers and investors through the creation of a secondary market for commercial rent-yielding properties.

[Source:- The Economic Times]