Here is the revised article with the Crisil attribution and Gautam Shahi’s quote restored:
Article
Commercial Office REIT Leasable Area to Surge 25–30% to 195 msf by Fiscal 2028
India’s listed commercial office real estate investment trusts (REITs) are set for significant expansion over the next two years, with total leasable area projected to rise by 40–45 million square feet (msf) — a 25–30% jump — to reach 190–195 msf by the end of fiscal 2028. The growth will be driven by planned asset additions from existing REITs and the recent listing of a new REIT this fiscal year, even as credit profiles remain healthy on the back of steady rental income and disciplined leverage.
A Crisil Ratings analysis of five listed commercial office REITs — including the one listed in the current fiscal — underpins these projections.
New Listing and Inorganic Growth Drive Expansion
Of the 40–45 msf addition expected, approximately 16 msf will come from the recently listed REIT alone. The remainder will largely flow from inorganic acquisitions — that is, the purchase of already operating assets rather than new construction. This approach has been a defining feature of Indian REIT growth: from the first listing seven years ago through fiscal 2026, roughly 75% of total asset additions were made through acquisitions rather than greenfield development. Acquiring operational assets insulates REITs from construction-related risks such as delays and cost overruns, and ensures income begins flowing immediately after acquisition.
The right of first offer on assets developed or acquired by sponsors on their own platforms will continue to serve as a key pipeline for future growth, giving REITs a steady and preferential access to quality commercial properties.
Demand Drivers: GCCs, BFSI, and Flexible Workspaces
Demand for premium commercial office space continues to be robust, anchored by three dominant occupier segments — flexible workspace operators, banking, financial services and insurance (BFSI) companies, and global capability centres (GCCs) cutting across sectors. GCCs in particular have emerged as one of the most consistent drivers of large-format, long-tenure office leasing in Indian cities, and their appetite for grade-A spaces — exactly the kind that REIT-owned portfolios offer — remains strong.
Gautam Shahi, Senior Director at Crisil Ratings, notes that this demand strength is broad-based: “Addition in commercial office space is accompanied by healthy demand growth from flexible workspace operators, banking, financial services and insurance institutions, and global capability centres cutting across sectors. This, combined with their good location and high quality, will keep occupancy at a stable 92–93% for REITs this fiscal, higher than the occupancy of the overall commercial office sector.”
This quality-and-location advantage is expected to keep REIT portfolio occupancy materially above the broader commercial office sector, which is weighed down by older and lower-grade stock in secondary locations.
Margins, Cash Flows, and Leverage
Sustained high occupancy, combined with contracted rental escalations built into lease agreements, is projected to keep EBITDA margins for REITs at around 70% — a level that comfortably supports distributions to unitholders.
However, because REITs by structure distribute most of their surplus cash flows to unitholders, asset additions must be funded through external debt rather than retained earnings. Despite this, overall loan-to-value (LTV) ratios are expected to remain stable at 26–28% through fiscal 2028 — broadly in line with the March 2026 level. This stability is possible because growth in debt is expected to be offset by a commensurate increase in gross asset value, calculated on a discounted cash flow basis, as new assets are added to the portfolio.
Diversification as a Credit Strength
Beyond income metrics, REIT credit profiles are also supported by portfolio diversification. The top three tenant sectors account for 70–75% of total leasable area, while the top three geographic locations account for 60–65% — a spread that limits concentration risk to any single market or industry cycle.
Risks to Watch
The outlook is not without risk. Artificial intelligence-driven changes in workspace requirements — particularly any acceleration in workforce automation — could dampen office demand, especially from technology tenants. A global economic slowdown could also reduce expansion plans of GCCs and BFSI occupiers, putting pressure on occupancy and rent growth. Additionally, any further new REIT listings would add supply to the market, which could affect competitive dynamics and unit pricing across the sector.
For retail investors and institutional players tracking Indian real estate exposure, listed commercial office REITs remain among the most transparent and cash-flow-visible vehicles in the asset class — and the expansion trajectory through fiscal 2028 suggests the sector’s growth runway remains well intact.
Also Read: India’s Office Market Poised for Strong Growth in 2025, Led by Engineering, BFSI, and Flex Spaces
