ICRA: India's office market can boost REIT market size sixfold

Rajeshwar Burla, Senior Vice President and Group Head, Corporate Ratings, ICRA, mentioned that the REIT-ready office space is estimated at around 510 million sq ft, constituting 53% of the total Grade A office supply as of September end. With a cap rate of 8.0-8.5%, the REIT-ready office market is valued in the range of Rs. 5.8-6.2 lakh crore. According to him, this creates significant potential for the Indian REIT market. Bengaluru holds the largest share of REIT-ready office supply at 31%, followed by the Mumbai Metropolitan Region (MMR) and Hyderabad at 16% and 15%, respectively.

As of September end, the total grade A office stock in the top six markets was approximately 956 million sq ft, with Bengaluru having the highest supply, followed by Delhi NCR and MMR.

Burla noted that there are currently three listed office REITs in India ? Brookfield India REIT, Mindspace REIT, and Embassy REIT ? accounting for 9% of the total office supply as of September end. The occupancy of office REITs is healthy at around 84%, with SEZ space making up 64% of the operational REIT portfolio. However, the occupancy for the REIT portfolio has been declining in the last 12 quarters due to high vacancies in the SEZ space following the removal of direct tax benefits. Burla expects that the recent government announcement allowing partial and floor-wise denotification of IT-SEZs will revive their attractiveness in the medium term and result in improved absorption.

ICRA maintains a stable outlook on India's commercial office sector, considering India's status as a preferred destination for global capability centres (GCCs).