Mumbai, Delhi NCR, and Bengaluru: Prime cities for Small and Medium (SM) REIT investment prospects

• Over 328 million sq. ft of office assets, valued at ~USD 48 billion are Small and Medium (SM) Real Estate Investment Trusts (REITs) -worthy.
• Mumbai and Delhi NCR account for nearly 50% of the SM-REIT worthy assets across the top seven (Mumbai, Delhi NCR, Kolkata, Chennai, Pune, Hyderabad, Bengaluru) markets of India
• Bengaluru and Hyderabad follow with of 15% and 11% shares respectively.

The fractional ownership market in India is projected to grow over 10 times and exceed USD 5 billion by 2030, according to recent findings by a JLL – Property Share Report. With a vast portfolio of over 328 million sq. ft. of office assets valued at approximately USD 48 billion, which are considered suitable for Small and Medium REIT investment, the potential for investment in this sector is tremendous. Fractional ownership is a concept where multiple investors collectively own a share or fraction of a high-value asset, such as real estate, without having to buy the entire property.

The two metros of Mumbai and Delhi NCR has emerged as top hotspots for asset acquisition opportunities under the SM REIT umbrella, reveals latest data. Additionally, the tech markets display notable growth potential, with attractive investment opportunities found in well-leased mid-sized assets that fall under the scope of SM REITs.

SM REIT potential in India’s top 7 markets unveiled.

Mumbai, Delhi NCR, and Bengaluru lead the SM REIT market, representing 73% of worthy assets in the top seven cities’ office sector.

“Mumbai presents unparalleled opportunities for SM REITs, offering a healthy mix of well-leased large and mid-sized assets ideal for acquisition by Fractional Ownership Platforms. With over 55% of the Grade A office market, equivalent to 84.4 million sq ft of assets, available and suitable for SM REITs, the investment potential reaches approximately USD 18.7 billion. The robust demand for rent-yielding assets and the presence of a professionally managed platform makes SM REITs an enticing choice for retail investors. Considering the high capital values in Mumbai, SM REITs prove to be a superior option over smaller office formats, eliminating the increased costs associated with acquiring and managing such properties.” said Dr Samantak Das, Chief Economist & Head of Research and REIS, India, JLL.

Kunal Moktan, Co-founder & CEO, Property Sharesaid, “Through the SM REIT regulations SEBI has effectively introduced an entirely new asset class to the retail and institutional investor universe, continuing the march towards securitisation of real estate assets that started with REIT regulations in 2014. SM REITs provide a tremendous opportunity to monetize income generating assets that currently do not have access to liquidity and when paired with technology has the potential to completely transform the real estate investment landscape in the country. As the first and largest FOP platform, Property Share will try and play its part in ensuring the success of these regulations and bringing exciting investment opportunities to the market.”

Mumbai leads with a USD 9 billion opportunity for SM REITs, followed by Delhi NCR. Both cities offer well-managed portfolios of small and mid-sized leased assets under a strata ownership model (distinct entities owning specific units within a larger development). With diverse occupier bases, Mumbai’s SBD North and Core and Fringe BKC corridors present significant SM REIT opportunities.

Gurugram dominates the Delhi NCR office segment, capturing 61% of the SM REIT market. Commercial corridors of Golf Course Extension, Golf Course Road, and MG Road present a USD 3 billion investment potential for SM REITs, indicating where such FOPs (Fractional Ownership Platforms) could explore potential opportunities. The Prime NH-8 corridor is also promising, with around 6 million sq ft of SM REIT-worthy assets amounting to a substantial USD 1 billion opportunity.

Bengaluru is one of the most well-occupied cities in the country, with its strong tech-driven demand from both global and domestic firms. The robust office ecosystem supports the availability of a portfolio of assets that are relevant for SM REITs. However, with large tech parks that are either under institutional or single developer ownership accounting for a large chunk of the total Grade A office market in the city, the SM REIT opportunity stands at just ~51 million sq. ft, around 1/4th of the total Grade A office stock. The biggest corridors are the ORR Southeast stretch and Whitefield in terms of physical asset availabilities.

These two are also the biggest markets when it comes to occupier demand and hence are the best opportunities for SM REITs to look at well-leased assets within the defined asset value parameter of INR 500 crores. Quality opportunities also exist within the off-CBD corridor stretching from Koramangala to peripheries along the Bannerghata Road and Mysore Road, where a host of small to mid-sized commercial office projects are available for potential investments under SM-REITs.

Hyderabad, propelled by its booming Grade A office stock and a strong demand from global GCCs, offers healthy opportunities for SM REITs. The market is led by assets in the Hitec and Gachibowli corridors, which account for 84% of the available potential, representing a USD 3.7 billion opportunity. With attractive valuations for a plethora of well-leased and mid-sized assets, Hyderabad is a prime destination for portfolio acquisitions by SM REITs.

India’s fractional ownership market is witnessing exponential growth, with significant potential for investors in the top seven markets. Currently valued at around USD 500 million, this market is expected to surpass USD 5 billion Assets Under Management (AUM) by 2030 despite regulatory compliance challenges. The JLL – Property Share report sheds light on the immense growth potential of India’s real estate fractional ownership market, providing valuable insights for those seeking opportunities. Mumbai, Delhi NCR, Bengaluru, and Hyderabad are leading the way in terms of investment prospects.

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