The total rental income potential of all commercial grade A office stock in the top eight cities of India for Real Estate Investment Trusts (REITs) will be $7.9 billion (around Rs 51,800 crore) by 2019, according to a report by property consultancy Cushman & Wakefield.
Of the total estimated rental income between 2015-2019, the existing inventory of Grade A office space could provide REITs an opportunity to generate an estimated rental income of $5.4 billion (around Rs 35,500 crore).
Between 2016 and 2019, new Grade A supply of around 160 million sq ft is expected to add $2.5 billion (around Rs 16,300 crore) in rental income.
"REITs once implemented in India would offer a slew of benefits to various stakeholders such as developers, investors and the industry," Cushman & Wakefield said. "REITs can proportionately invest in commercial properties across smaller cities that will help in rapidly developing smaller cities while easing pressure on the top few cities in India. It will also provide occupiers with a wider choice of cities and tap into a larger pool of human resource. Moreover, the listing of REITs in India would encourage many mid-sized development firms to consider this avenue, as REITs would provide them with exits and an incentive to develop high-grade buildings," it said.
Sanjay Dutt, managing director, India, Cushman & Wakefield says that owing to high rentals, Mumbai has the potential to generate the highest rental income for REITs till 2019, while in 2016, Bengaluru's rental income potential is expected to surpass that of Delhi-NCR's led by increased Grade A supply.
"At a time when balance sheets of developers are stretched, REITs would help developers resolve their fund-raising issues and allow real estate developers with an option to exit projects. Overall, the REITs system is expected to provide a level-playing field for investors and increase transparency in the real estate sector which till date has largely remained opaque," he says.
Although REITs are likely to offer benefits to various stakeholders in the industry, there are some challenges that could delay its implementation in India.
"Taxation norms are extremely critical to the success of REITs in any country. Despite significant relaxations in the tax regime for REITs in India, certain tax issues have kept sponsors away from launching REITs. Under the current regulations, the inclusion of stamp duty and registration charges, Value Added Tax (VAT) Dividend Distribution Tax (DDT) etc. continues to be a hurdle in launching REITs in India," the property consultancy said.
Source: PropertyatNeoDevelopers.Wordpress.Com
Of the total estimated rental income between 2015-2019, the existing inventory of Grade A office space could provide REITs an opportunity to generate an estimated rental income of $5.4 billion (around Rs 35,500 crore).
Between 2016 and 2019, new Grade A supply of around 160 million sq ft is expected to add $2.5 billion (around Rs 16,300 crore) in rental income.
"REITs once implemented in India would offer a slew of benefits to various stakeholders such as developers, investors and the industry," Cushman & Wakefield said. "REITs can proportionately invest in commercial properties across smaller cities that will help in rapidly developing smaller cities while easing pressure on the top few cities in India. It will also provide occupiers with a wider choice of cities and tap into a larger pool of human resource. Moreover, the listing of REITs in India would encourage many mid-sized development firms to consider this avenue, as REITs would provide them with exits and an incentive to develop high-grade buildings," it said.
Sanjay Dutt, managing director, India, Cushman & Wakefield says that owing to high rentals, Mumbai has the potential to generate the highest rental income for REITs till 2019, while in 2016, Bengaluru's rental income potential is expected to surpass that of Delhi-NCR's led by increased Grade A supply.
"At a time when balance sheets of developers are stretched, REITs would help developers resolve their fund-raising issues and allow real estate developers with an option to exit projects. Overall, the REITs system is expected to provide a level-playing field for investors and increase transparency in the real estate sector which till date has largely remained opaque," he says.
Although REITs are likely to offer benefits to various stakeholders in the industry, there are some challenges that could delay its implementation in India.
"Taxation norms are extremely critical to the success of REITs in any country. Despite significant relaxations in the tax regime for REITs in India, certain tax issues have kept sponsors away from launching REITs. Under the current regulations, the inclusion of stamp duty and registration charges, Value Added Tax (VAT) Dividend Distribution Tax (DDT) etc. continues to be a hurdle in launching REITs in India," the property consultancy said.
Source: PropertyatNeoDevelopers.Wordpress.Com
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