India’s Lone REIT Beats Realty Stocks
Watch | India’s only listed REIT outshines realty stocks
India’s only listed real estate investment trust has outperformed the stocks from the sector even as the developers grapple with a liquidity crunch in a slowing economy.
Embassy Office Parks REIT has jumped 32 percent since listing on March 29 compared with a 5 percent decline in the Nifty Realty Index.
Developers are struggling to raise capital after funding from non-bank lenders dried up following the surprise defaults of the AAA-rated IL&FS group a year ago. That has triggered consolidation in the sector. But bigger companies such as Prestige Estates Projects Ltd., Godrej Properties Ltd., Brigade Enterprises Ltd. and Phoenix Mills Ltd. that focus on commercial real estate and affordable housing gained. DLF Ltd. and Indiabulls Real Estate Ltd. tumbled because of corporate governance concerns.
The current real estate cycle remains favourable for the office sector, Adhidhev Chattopadhyay, research analyst at ICICI Securities, said in a report. In the first half of 2019, record completion of 28 million square feet of commercial real estate led to 21 million sq ft of net absorption as a large portion of the upcoming supply was pre-committed. Rental portfolio of annuity players is expected to see a robust growth, he wrote.
Embassy Office Parks, according to a note by Ambit Capital, is expected to give a dividend yield between 6.1 percent to 6.6 percent for the next two financial years compared to 0.5-1.4 percent offered by players like DLF, Prestige Estates and Phoenix Mills.
REITs are mutual fund-like instruments that pool in income generating assets and allow investors to bet on real estate without owning it.
Blackstone Group and K Raheja Corp are in advanced stages of filing papers with the market regulator to list the nation’s second REIT comprising commercial properties of the Mumbai-based developer, BloombergQuint reported earlier.
Office space spread across 294 square feet worth $35 billion can be potentially be monetised through REITs in India, JLL said in a report. Bengaluru leads with with 97 million square feet but, according to the report, Mumbai offers the best value at $168 per square foot.