520 lakh sq ft SM REIT-ready office space provides monetization opportunity of ₹67,000 to 71,000 crore: ICRA - Hindustan Times
close_game
close_game

520 lakh sq ft SM REIT-ready office space provides monetization opportunity of 67,000 to 71,000 crore: ICRA

May 02, 2024 10:53 PM IST

Of this 3% is that of Grade A supply and 20% of grade B supply, indicating a healthy potential for SM REIT listings in the commercial office space

Around 520 lakh square feet of office space is eligible for small and medium REITs (SM-REIT) listing, creating a monetization opportunity of 67,000 to 71,000 crore. Of this 3% is that of Grade A supply and 20% of grade B supply, indicating a healthy potential for SM REIT listings in the commercial office space, an analysis by ICRA has said.

Around 520 lakh square feet of office space is eligible for small and medium REITs (SM-REIT) listing, creating a monetization opportunity of <span class='webrupee'>₹</span>67,000 to <span class='webrupee'>₹</span>71,000 crore. (Picture for representational purposes only).
Around 520 lakh square feet of office space is eligible for small and medium REITs (SM-REIT) listing, creating a monetization opportunity of 67,000 to 71,000 crore. (Picture for representational purposes only).

As of December 2023, the total Grade A office supply stood at 9800 lakh sq ft and Grade B office at 1150 lakh sq ft across the top seven cities. At a cap rate of 8-8.5%, SM REIT-ready office space provides monetization opportunities of Rs. 67,000 to 71,000 crore across top seven cities. Small and medium REIT-ready office spaces are estimated at around 520 lakh sq ft to 530 lakh sq ft, indicating a healthy potential for SM REIT listings in the commercial office space, the analysis said.

Now catch your favourite game on Crickit. Anytime Anywhere. Find out how

Also Read: First small and medium REIT expected to be listed by October: Naredco

SEBI has announced that it will regulate fractional ownership platforms (FOPs) offering real estate assets through small and medium REITs (SM REIT). Registration of existing FOPs and new ones is mandatory under SEBI. FOPs allow investors to participate in real estate ownership with fractional shares and minimum investment ranging from Rs. 10-25 lakh.

Given the increasing value of investments with such FOPs and the growing number of investors, SEBI has introduced regulatory oversight in the form of SM REIT regulations, the analysis said.

Also Read: SEBI notifies SM REITs: Move to regulate fractional ownership industry and safeguard investors’ interests

SM REITs will provide an opportunity for small Grade A and most of the Grade B office developers to monetize their investments. Also, fractional ownership platforms are expected to be formalized, leading to wider market acceptance. At present, it is estimated that the assets under management (AUMs) for various FOPs stand at Rs. 5,000 crore. 

Minimum unitholding requirement for SM REITs could act as a deterrent

However, the minimum unitholding requirement for SM REITs could act as a deterrent from a scalability perspective, the ICRA analysis noted.

ICRA has maintained a Stable outlook on India’s commercial office sector. With healthy demand from global capability centres (GCCs), non-IT MNCs and domestic corporates, the net absorption across the top six cities is expected to grow by 4-5% in FY2025, after a decline of 19-20% to 470 lakh square feet (msf) in FY2024. With the influx of a huge supply of around 600 lakh sq ft in FY2025, the vacancy levels are expected to remain at around 16.0-16.2% (largely similar to the previous year).

Also Read: Sebi notifies small and medium Real Estate Investment Trusts

Rajeshwar Burla, Senior Vice-President & Group Head - Corporate Ratings, ICRA, said: “Small and Medium REITs will provide an opportunity for small Grade A and most of the Grade B office developers to monetise their investments. Also, fractional ownership platforms (FOPs) are expected to be formalized, leading to wider market acceptance,” he said.

In November last year, the Sebi board cleared the amendments to the REITs Regulations, 2014, in order to create a regulatory framework for the facilitation of SM REITs, with an asset value of at least 50 crore vis-a-vis minimum asset value of 500 crore for existing REITs.

As per the notification, the minimum price of each unit of the scheme of SM-REIT shall be 10 lakh or such other amount as may be specified by Sebi from time to time. The size of the asset proposed to be acquired in a scheme of the SM-REIT is at least 50 crore and less than 500 crore.

ICRA noted that registration of existing FOPs and new ones is mandatory under SEBI.

 

 

 

 

 

 

Get World Cup ready with Crickit! From live scores to match stats, catch all the action here. Explore now!

See more

Get Current Updates on India News, Elections 2024, Lok sabha election 2024 voting live , Karnataka election 2024 live in Bengaluru , Election 2024 Date along with Latest News and Top Headlines from India and around the world.

SHARE THIS ARTICLE ON
Share this article
SHARE
Story Saved
Live Score
OPEN APP
Saved Articles
Following
My Reads
Sign out
New Delhi 0C
Wednesday, June 19, 2024
Start 14 Days Free Trial Subscribe Now
Follow Us On