After a long wait, India is witnessing the country’s first real-estate investment trust (REIT) listing: Embassy Office Parks REIT (Embassy REIT), which opened its IPO books on March 18, 2019 and closed on March 20, 2019. Embassy Office Parks REIT is issuing units aggregating up to Rs 47,500 million (the issue).
The launch of Blackstone-Embassy Group’s REIT marks an important milestone in the Indian real estate sector, according to Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE. “REITs as a product will significantly enhance transparency and governance in the commercial real-estate market and attract more institutional fund flows into the sector. The listing and its subsequent performance will be closely monitored by various stakeholders: developers, institutional funds, corporate houses, etc. A successful REIT listing might result in multiple offerings by various other sponsors in the near future, including office, retail, warehousing and hospitality.”
Globally, REITs have a proven and successful track record in several Asian countries such as Japan, Singapore, Malaysia, Thailand, Taiwan, South Korea and Hong Kong. In 2017 alone, total acquisitions undertaken by REITs in Asia Pacific crossed $ 20 billion, with an approximate share of 15 per cent in the overall commercial real-estate acquisitions undertaken in the region. In the first half of 2018, REIT acquisitions touched $ 10 billion, accounting for a share of 17 per cent in the overall investment volume in the region during the period. “For many real-estate markets in the world and Asia, REITs have proven to be a game-changer and have the potential to boost investor sentiment,” adds Magazine. “India offers major advantages such as a wide variety of quality assets, sustained government support in easing regulations, a wide investor base and opportunities for capital appreciation, among others. Hence, we are hopeful that India’s first REIT will be a big success and help elevate global sentiments on the Indian real-estate market.”
And Arvind Nandan, Executive Director Research, Knight Frank India, says, “On one hand, for investors, it will provide avenues to earn annuity income and capital appreciation, besides being an excellent tool for portfolio diversification. On the other, for the supply side, it will significantly increase the depth of the market and bring in more institutional players and capital. A successful REIT listing will provide a significant boost to the scale of commercial projects andpush the commercial space into a different growth paradigm.”
The net proceeds from the issue will be used for partial or full repayment or pre-payment of bank/financial institution debt of certain asset special purpose vehicles (SPVS) and by the investment entity; payment of consideration for acquisition of the Embassy One Assets currently held by Embassy One Developers (EODPL); and general purposes.