With real estate sector making a comeback, listed real estate investment trusts (REITs) are gaining popularity at the bourses. Despite two of three REITs were launched during Covid, these units have posted 8-27 per cent returns, since April 1.
Analysts expect more REIT launches in the coming years with real estate players, including the listed ones. Sources said they want to capitalise on pick up in the real estate demand and people returning to offices. They may take 2-5 years, they added.
REITs are an asset class that pool investors money like mutual funds and use it to buy a portfolio of real estate assets. They manage these assets to generate a regular income and capital appreciation and will be re-distributed to investors like dividend.
Currently, Embassy Parks REIT, Brookfield India REIT and Mindspace Business Park REIT are listed on the NSE and BSE.
New office demand surges
Leasing activity in H1 FY22 witnessed decent growth, as per Anarock Research.
In H1 FY22, net absorption in the top seven cities was 10.76 million sq ft or 53 per cent less than in H1 FY20 (the pre-pandemic period). However, new office completion has picked up pace and already surpassed the pre-Covid levels by 2 per cent. As much as 22.2 million sq ft of new area was completed and office vacancies in the top seven cities have risen by 2.60 per cent.
According to Shobhit Agarwal, MD & CEO – Anarock Capital, the REIT market opportunity is significant and still largely untapped in India. Despite the pandemic, their rental collections have been good at 98-99 per cent. “The successful launch of Mindspace despite the ongoing pandemic sent out positive signals and paved the way for others to follow suit. In fact, the latest performance numbers released by both Brookfield and Embassy REITs clearly indicate the positive trends,” he told BusinessLine.
Financials
Embassy Office Parks REIT, in H1-FY22, reported an 18.1 per cent rise in net operating income (NOI) to ₹1,245 crore on a y-o-y basis. Its revenue grew 17.9 per cent to ₹1,473 crore. Assets include office parks, two hotels and a 100 MW solar power set-up. Distribution was about ₹537 crore for Q2 FY22
Brookfield India REIT, which has ₹1,56,300 crore worth of asset under management, saw its NOI dip marginally by 2 per cent to ₹333 crore. It extended dividend pay-out worth nearly ₹182 crore to unit holders. On Saturday, the company announced purchase of 100 per cent stake in Seaview Developers (SDPL Noida), which owns Candor TechSpace N2, for ₹3,970 crore.
Mindspace Business Park, reported an NOI of ₹359 crore, up by 6.7 per cent. It reported a distribution of around ₹273 crore or ₹4.60 per unit for Q2 FY22. Embassy Office Parks units moved from ₹326 to ₹358 from April 1 to December 16. . Mindspace Business Parks rose to ₹327 from ₹302, an 8 per cent gain. Brookfield units jumped 27 per cent to ₹294 (₹232).