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Web Exclusive | March 2019

How India REITs Compare Globally

In those countries, REITs are a market-proven model that has withstood the test of time and produced very attractive returns for their investors. Globally, REITs have responded quite favourably to the evolving market dynamics. Indian REITs hope to take a cue from their western counterparts by bringing in regulations in line with the globally recognized norms so as to maximize profits for REIT investors here.

 

In Canada, the average return for REIT investors was around 10 per cent in 2017, while in the UK, it hovered between 8-10 per cent. This average return is on all REITable assets including commercial and residential projects together.

 

In India, the projected five-year returns on commercial assets is an optimistic 14 per cent, largely because Grade A commercial real estate has been on a protracted winning streak since 2017. Commercial real estate withstood the vagaries of the various reforms much better than the residential asset class.

 

In the US, smaller investors account for between 25-30 per cent of REIT participation from the previous 50 per cent about a decade ago. In India, we can reasonably start with at least 15-20 per cent of participation by smaller individual investors. All of this certainly bodes well for both FIIs and smaller investors focused on REITable commercial real estate - a space which has also benefited from the incumbent government’s efforts to improve the ease of doing business in India.

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