Mumbai, Delhi NCR, and Bengaluru account for almost 70% of SM REIT-worthy assets across top seven cities

Over 328 million sq ft of office assets, valued at around $48 billion are Small and Medium (SM) Real Estate Investment Trusts (REITs) -worthy, a report has said

Over 328 million sq ft of office assets, valued at around $48 billion are Small and Medium (SM) Real Estate Investment Trusts (REITs) -worthy. Mumbai, Delhi NCR, and Bengaluru lead the SM REIT market, representing 73% of worthy assets in the top seven cities' office sector, a report by JLL – Property Share has said.

Mumbai, Delhi NCR, and Bengaluru lead the SM REIT market, representing 73% of worthy assets in the top seven cities' office sector. (Representational photo)(Pixabay)

The top seven SM-REIT worthy assets are located in Mumbai, Delhi NCR, Kolkata, Chennai, Pune, Hyderabad and Bengaluru.

Mumbai leads with a $18.7 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, the report said.

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 $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 $1 billion opportunity, it said.

SM REIT opportunity stands at just around 1/4th of the total Grade A office stock in Bengaluru

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 around 51 million sq. ft, around 1/4th of the total Grade A office stock, the report said.

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 ₹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, it noted.

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 a plethora of well-leased and mid-sized assets, Hyderabad is a prime destination for portfolio acquisitions by SM REITs, the report said.

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, the report noted.

“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 Samantak Das, Chief Economist & Head of Research and REIS, India, JLL.

Kunal Moktan, co-founder and CEO, Property Share said, “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.”