R ARIVANANTHAM
CHENNAI, SEPT 4
Real Estate Investment Trusts (REITs) – REITs, a new initiative created in India five years ago for the benefit of retail investors are growing in a faster pace, said Abhishek Agrawal, Chief Financial Officer, Embassy REIT here on Tuesday.
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— Embassy REIT (@embassy_reit) September 4, 2024
In a free-wheel chat with media personnel, Abhishek Agarwal said, “In just five years, through a pandemic and with significant market volatility, Real Estate Investment Trusts (REITs) have come a long way. Today, there are 4 REITs that comprise over ₹90,000 crores of equity market capitalization, encompass 125 million square feet of commercial space, and span the Indian office and retail sectors.
- Indian REIT asset class has seen distributions cross over ₹18,300 cr since 2019
- The investors of Embassy REIT include 41.5 % of Foreign Institutional Investors, 22 % were Mutual Funds and 16 % are retail investors
The Indian REIT asset class has seen distributions cross over ₹18,300 crores since 2019. This surpasses the combined dividends distributed by real estate companies that form the entire Nifty Realty Index’’.
He further said, the Embassy REIT, the first listed REIT in the Indian market, alone has distributed over ₹10,000 crores since its listing in April 2019 and has seen its retail unit holder base grow to over 100,000 investors.
With its vast market size, favourable demographics, and rapid urbanization, India offers immense opportunities for real estate investment and for REITs in particular. With India continuing to be a hiring destination for global multinationals, and the purchasing power of Indian consumer continuing to rise, the resilience and potential of India’s commercial real estate sector and the growing popularity of the REIT asset class has never been more apparent, he added.
Historically, Indian real estate has been illiquid and primarily residential-focused and fared poorly on corporate governance, he said.
REITs have completely changed those perceptions. REITs provide retail investors an ideal investment vehicle to invest in commercial real estate, through a publicly traded unit, without actually having to buy, own and manage a physical real estate asset. They are also required to own at least 80% of assets in income-generating properties and mandated to pay out at least 90% of cash flows semi-annually.
Abhishek Agrawal, Chief Financial Officer, Embassy REIT said, “REITs provide retail investors exposure to Grade A commercial real estate in a liquid, transparent and highly regulated form in two powerful ways. First, REITs are mandated to pay out at least 90% of net distributable cash flows to their unitholders. So, investors get regular income through distributions. Second, investors get the capital appreciation as well, as REITs are effectively high dividend stocks with strong embedded growth potential through vacant space lease up, rental escalations and significant rental reversions at or above market rents.”
Replying to queries, Abhishek Agarwal said the occupancy rate is hovering around 83 % to 85 % now aid expected that it will touch 88 % during this year end. The investors of Embassy REIT include 41.5 % of Foreign Institutional Investors, 22 % were Mutual Funds and 16 % are retail investors, he added.
The future of the REIT market looks extremely promising. The tax efficiency of the REIT distributions and their affordability, with an individual able to buy just one share of a REIT for as low as ₹150 – ₹400 per unit. That’s as good as buying real estate with just a few hundreds of rupees as opposed to a few lakhs to a few crores, which is the minimum investment one would need to make, if they were to buy such high-quality commercial real estate directly or through a fractional ownership/ strata structure. That’s why REITs offer this excellent opportunity for retail investors to participate in India’s commercial real estate growth story.
Shwetha Reddy, Head – Marketing & Communication and Savitha Banu, Finance Controller also present at the media briefing.
Followed by media briefing Embassy REIT has organized a road show for investors in Chennai.
