Bulletin, Mumbai, September 24, 2018
The Indian real estate sector is about to experience something it has never seen before - A real estate investment trust (REIT). REITs refer to entities that own, operate or finance the construction and maintenance of properties that produce income on an ongoing basis.
Structured similarly to mutual funds, REITs are 'listed', and investors may choose to commit their money into such trusts in exchange for dividend-based returns.
The Securities & Exchange Board of India (SEBI) had notified all applicable REIT rules for India as early as September 2014. Four years later, Embassy Office Parks (a joint venture between the India-based Embassy Group and US-based Blackstone group) is set to debut as India's first and Asia's largest REIT, as per built up area. The trust was registered in 2017 by the two participating real estate behemoths, backed by a strong banking portfolio comprising JP Morgan, Kotak Mahindra, Morgan Stanley, and Merrill Lynch (a Bank of America corporation).
Through the Embassy Office Parks route, this REIT will proceed to raise up to Rs 5,000 crores.
Papers for this REIT were filed with SEBI today, and with this development, India joins a league of global REIT markets including the US, the United Kingdom, Canada, Japan, Singapore and Australia. The Embassy Office PArks REIT will enslist properties totaling up to 33 million square feet.
As one of India's most aggressive real-estate investors, the Blackstone Group today owns India's biggest portfolio of income-producing office assers. The group has committed $5.3 billion across property markets in Mumbai, Pune, Bengaluru, Chennai, Hyderabad and Noida.
In addition to over 70 Embassy Office Parks properties spread across Mumbai, Pune, Bangalore, and NCR, the Blackstone group has also its own commercial assets such as the Express Tower in Nariman Point, a portion of the First International Financial Center located in the Bandra-Kurla Complex, and the 24x7 Park situated in Vikhroli, Mumbaim in this REIT portfolio.
Many property consultants have speculated that the annual lease contracts that these buildings currently operate on, are priced nearly 35% lower than currently prevailing market rates. This means, that lease renewals for these contracts will yield a much higher rental and thereby, dividend for the REIT.
The projected revenue from these REIT-enlisted properties, is about Rs 2,000 crores every year.