Real Estate Investment Trust on the road of recovery

A decade-old alternative investment product real-estate investment trust, widely known as REIT, is slowly gaining investors’ interest When market regulator Securities and Exchange Board of India (SEBI) introduced REITs in 2014, the rules were stringent and restrictive for both sponsors and investors. The stringent norms were mainly to protect retail investors. But since then, SEBI has been relaxing rules to accommodate more sponsors and investors. REITs are investment vehicles that allow individuals to own a share in income-generating commercial properties, such as office spaces, malls and warehouses. Just 5 REITs The most recent one to enter the field was Knowledge Realty Trust REIT, and it was well received. The REITs offer saw tremendous response, receiving bids at a healthy 12.48 times. The qualified institutional buyers’ (QIB) portion was subscribed a little over nine times, while the non-institutional investors’ bloc was booked 16.57 times. The public REIT hit the primary market after a gap of four years. The last IPO on REIT was launched by Brookfield India Real Estate Trust in 2021. Despite SEBI and sponsors’ interests, only five REITs - Embassy Office Parks, Mindspace Business Parks, Nexus Select Trust, Brookfield India Real Estate Trust and the latest entrant Knowledge Realty Trust - hit the market. This is a abysmally poor number when compared with developed markets such as the US that has nearly 70 such products. Ideally, REITs should have emerged as a strong investment alternative or diversification for investors who wish to stay away from market volatility. Lack of awareness One of the major reasons for the lackadaisical interest was the lack of awareness about the product. Both the industry and market intermediary institutions, including exchanges and SEBI, failed to popularise the product. However, a recent report from Colliers India is heartening to read. According to Colliers, a global diversified professional services and investment management company, India’s REIT market is steadily progressing from a “Nascent” to “Early Growth” stage, with close to 140 million sq ft of real estate assets including office and retail spaces already getting listed. In its latest report: “REITs Unlocked: Accelerating India’s Real Estate Maturity”, it said, the four listed office REITs currently encompass close to 133 million sq ft of Grade A office space. Additionally, about 371 million sq ft of office assets, accounting for about 46 per cent of the existing Grade A stock, can potentially come under future REITs. (The report was published ahead of the listing of Knowledge REIT). Furthermore, existing REITs have around 34 million sq ft of under construction supply and this is likely to become operational in the next 1-2 years. Overall, Indian REITs continue to pick pace, especially in the office sector, supported by new listings, broadening of occupier base and growing institutionalisation in the segment. However, REITs market in India is relatively smaller in scale and have listed office, retail and warehousing portfolios within the trusts. The regulatory environment in India is strong and REITs can ultimately expand to newer asset classes. Interestingly, SEBI has been championing the case for Small and Medium Real Estate Investment Trusts (SM-REITs) in recent years, it said. SEBI recently suggested a significant amendment to the definition of “Strategic Investor” within the SEBI (Real Estate Investment Trusts) Regulations, 2014, and the SEBI (Infrastructure Investment Trusts) Regulations, 2014. The move is intended to widen the pool of eligible investors, thereby enhancing capital access for both REITs and Infrastructure Investment Trusts (InvITs) in India. As a product, REITs offer an ideal blend of stability and growth. Hope, going ahead, they get their due respect from investors, that will benefit both the economy and investors. Published on August 29, 2025