Real Estate Investment Trust Funds (REIT) in the retail sector will be savior for all the investments locked in those high costs assets, according to a cross section of stakeholders at the India Shopping Centre Forum 2016 held in Mumbai.
Shopping malls, which have not gone on stream and for those which are operational but not milking attractive rental yields are not able to get the desired valuation. Some assets of these malls have been caught in the cross-fire of policy and regulations, delaying operations by as long as eight years.
According to reports, there are 255 operational malls in the top seven cities of the country and occupational response in lackluster with only 12 mall out 100 running successfully in the Delhi-NCR region while 10-15 malls performing well in Mumbai out of the 45.
According to Partner & Head of Building, Construction & Real Estate sector, KPMG India, Neeraj Bansal, “There is around 70-75 million square feet of retail real estate space that is REITable including 16 million in Mumbai and 25 million in Delhi-NCR.”
India’s Retail asset is almost a quarter of Global REITs value with 26 per cent in retail, 12 per cent in office, 27 per cent in diversified and 3 per cent in hospitality while in the Asian region, retail accounts for 19 per cent, office for 12 per cent, diversified 56 per cent and hospitality 1 per cent, Bansal added.
Apart from the above REITs, there are other forms like residential, self-storage, industrial, healthcare, infrastructure and specialty (movie theatre, telecom tower, etc.).
Unlike in India, where REITs are just about getting introduced, the countries with several decades of REIT exposure has seen higher percentage of success in US, Australia and Singapore and limited success in other countries like Hong Kong.
REIT accounts for 53 per cent, 50 per cent and 78 per cent of the real estate market in US, UK and Australia respectively while it was a miniscule 6 per cent in Hong Kong, Bansal concluded.