Small, medium REITs mkt size may exceed $60 bn by 2026 in India

The introduction of the SM REITs framework marks a pivotal moment for India’s commercial real estate sector. By enhancing transparency and offering robust investor protections, SM REITs are set to redefine portfolio diversification - Anshuman Magazine, Chairman and CEO, CBRE

Hyderabad: The growing interest of investors in SM REITs (Small and Medium Real Estate Investment Trusts) is playing a key role in shaping the future of India’s commercial real estate landscape. The indication being that SM REITs’ market size is expected to surpass $60 billion by 2026. During this period, 50 million sft of completed commercial office space will be added to the potential SM REITs market, a report said.

CBRE South Asia Pvt Ltd recently released its report titled, ‘Navigating the SM REIT Landscape - A Look at Regulations and Implications.’ The report mentioned that the total completed office stock in India currently stands at over 800 million sft, out of which REIT-listed office inventory is recorded at 88 million sft. The current completed commercial office space available for SM REITs is more than 300 million sft.

Listing the top seven cities, the CBRE report mentioned that Mumbai has the highest potential SM REIT-ready completed office stock of 75 million sft as of June 2024, with around 10 million sft of upcoming supply by 2026. Delhi-NCR followed next with potential stock of 70 million sft. Bengaluru has 50 million sft, while Hyderabad has 30 million sft of potential stock. NCR, Bengaluru and Hyderabad are likely to add an additional supply of potential SM REIT-worthy stock of 36 million sft by 2026.

Anshuman Magazine, Chairman and CEO, CBRE - India, said: “The introduction of the SM REITs framework marks a pivotal moment for India’s commercial real estate sector. By enhancing transparency and offering robust investor protections, SM REITs are set to redefine portfolio diversification. This framework will not only mitigate risks associated with under-construction projects but will also ensure steady returns through mandatory quarterly distributions, making real estate a more accessible and secure investment option for a broader range of investors.”

The new SM REIT regulations provide a framework for Fractional Ownership Platforms (FOPs), which are investment vehicles pooling funds to invest in securities issued by special purpose vehicles (SPVs) that acquire real estate assets on a fractional or undivided ownership basis. Primarily targeting pre-leased, income-generating commercial properties, these platforms appeal to high-net-worth individuals (HNIs), non-resident Indians (NRIs), and overseas citizens of India (OCIs). Managed by individual entities, FOPs have been classified by Sebi as a form of collective pooled scheme, necessitating the implementation of the SM REIT regulations to ensure investor protection and market integrity.