Mumbai, Delhi-NCR, Bengaluru lead Small & Medium REIT investment prospects

The fractional ownership property market in India is projected to grow over 10 times and exceed $5 billion by 2030, and the potential for investment in this sector is significant given the portfolio of over 328 million sq ft of office assets valued at around $48 billion, which are considered suitable for Small and Medium REIT (SM REIT) investment, showed a JLL India-Property Share report.

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

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.

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

"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 around $18.7 billion,” said Samantak Das, Chief Economist & Head of Research and REIS, India, JLL.

According to him, 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.

"SM REITs provide a good 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,” said Kunal Moktan, Co-Founder & CEO, Property Share.

He is of the view that 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.

India's fractional ownership market is witnessing exponential growth, with significant potential for investors in the top seven markets. Currently valued at around $500 million, this market is expected to surpass $5 billion Assets Under Management (AUM) by 2030 despite regulatory compliance challenges.

Mumbai leads with a $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. With diverse occupier bases, Mumbai's SBD North and Core and Fringe BKC corridors present significant SM REIT opportunities.

Gurugram leads the Delhi NCR office market, capturing 61% of the SM REIT potential. Commercial corridors of Golf Course Extension, Golf Course Road, and MG Road present a $3 billion investment potential for SM REITs, indicating where such fractional ownership platforms could explore potential opportunities. The NH-8 corridor is also promising, with around 6 million sq ft of SM REIT-worthy assets amounting to a substantial $1 billion opportunity.

Bengaluru’s 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 nearly 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 availability.

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 Rs 500 crores.

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 $3.7 billion opportunity. With attractive valuations for well-leased and mid-sized assets, Hyderabad is a prime destination for portfolio acquisitions by SM REITs.