Why is India the Fastest-Growing REIT Market in Asia-Pacific?

India's REIT Market: A 31% Surge Amid Regional Decline

India's real estate investment trust (REIT) market experienced a remarkable 31% growth in 2023, the highest in the Asia-Pacific region, despite a 7% decline across the broader Asian REIT market, which now stands at $252 billion. This growth signals a robust opportunity for investors in India's nascent but rapidly expanding REIT sector.

Key Drivers Behind India's REIT Growth

One of the major contributors to this surge was the introduction of Blackstone’s Nexus Select Trust, India’s first publicly listed retail REIT. This REIT, which includes 17 urban shopping centers, two hotels, and three office assets, saw a 30% increase in stock price within a year of its IPO and plans to double its portfolio in the next five years.

The Resilient Office Market

The office sector's positive outlook has also played a crucial role in the growth of REITs in India. As employees return to workplaces and large deals re-enter the market, high occupancy rates in existing portfolios have further bolstered confidence among investors and developers.

A Nascent Market with Growing Potential

India's REIT market, though still in its early stages, consists of only four REITs, all of which launched IPOs within the last five years. The strong performance of these REITs underscores their attractiveness to investors, with top office REITs like Embassy and Mindspace delivering 9-10% CAGR returns over the last two years.

Asia-Pacific REIT Landscape

India on the Rise Across Asia, there are 225 active REITs, with traditional powerhouses like Japan, Singapore, and Hong Kong dominating the market. However, India and China's emerging REIT markets are rapidly adding new growth opportunities. India’s strong performance highlights its potential as a key player in the region, offering investors diversification and substantial growth prospects.

The Global Context of REITs

REITs are a well-established global asset class, introduced in the US in 1960 to enable retail investors to participate in commercial real estate through a liquid, exchange-listed vehicle.

With 893 listed REITs globally and a combined market capitalization of approximately $1.9 trillion as of December 2022, the Indian market, which began in earnest with regulatory guidelines in 2014 and the first listing in 2019, is poised for continued expansion.