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After leased office properties, India to soon have first REIT of retail assets

Good news for prospective property buyers in retail real estate! After leased office realty assets, now we will see first Real Estate Investment Trust (REIT) of retail assets as institutional investors and developers look to monetise their rent-yielding space in shopping malls, says a report.
Property consultant JLL in its latest report on retail real estate segment highlighted that institutional investment in the retail sector has been picking up since 2021. More than USD 862 million investments have come from 2021 (excluding portfolio deals).

Globally, REIT has been a popular instrument for many yeas, but in India, it was introduced a few years ago to attract investment in the real estate sector by monetising rent-yielding assets. It helps unlock the massive value of real estate assets and enable retail participation.

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At present, there are three listed REITs – Embassy Office Parks REIT, Mindspace Business Parks REIT and Brookfield India Real Estate Trust – on Indian stock exchanges but all these are of leased office assets.

Many global investors are investing in the retail sector either by buying a stake in existing assets or through greenfield development platforms.

“The retail market seems to benefit from favourable demographics, rapid urbanisation, and rising consumption,” the consultant said.

The report noted that investors are expecting healthy returns in the long run, considering the growth potential.

“Investors are looking for quality Grade A assets by established developers having less vacancy. Investors prefer leased-based assets over strata-sold assets to ensure fair market rentals and timely returns,” it said.

The consultant also mentioned that investment in retail assets is not just limited to metros, as significant activities have been recorded in Tier 2 and Tier 3 cities as well.

“Additionally, investments by these big institutional players help developers to exit the project partially or fully, reduce their debt, and focus on other developments. A lot of foreign funds are willing to acquire quality retail assets yielding good rental income,” the report said.

Investors are either buying or creating portfolios considering future public exit via REITs.

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