April 1, 2019 / 11:15 AM / 6 months ago

India's first REIT sees listing gains; more issues likely

MUMBAI, April 1 (Reuters) - India’s first-ever real estate investment trust (REIT), Embassy Office Parks, rose more than 8 percent on its debut on Monday, renewing expectations for more such issues in the coming months.

The unit closed at 314 rupees, marking a gain of 4.67 percent, after touching a high of 324.80 rupees — 8.3 percent above its initial public offering (IPO) price of 300 rupees.

U.S.-based Blackstone Group and Indian real estate developer Embassy Group are the sponsors of this REIT, which comprises 11 office assets in the cities of Bengaluru, Mumbai, Noida and Pune.

REITs would allow for greater participation from retail investors in the asset class, said Shishir Baijal, chairman and managing director at Knight Frank India, a real estate consultancy firm.

“The commercial office space segment has been growing from strength to strength over the past few years. We expect this momentum to sustain in the near future, which would encourage more participants to enter the REITs market, which in turn, will improve the fund flow into the sector,” Baijal added.

Earlier this month, investors bid for about 183.5 million units, or 2.57 times the 71.3 million on offer.

“The success of REITs in India will depend on stable dividends and valuations. Investors will be looking at post-tax returns in dividends and subsequent capital gains,” said Surendra Hiranandani, founder and director, House of Hiranandani.

Parth Mehta, managing director at Paradigm Realty, however, feels confidence in the real estate sector from institutional investors is still a bit laggard and has caused a timid listing for the REIT.

“We feel with improved transparency in real estate overall, on the back of strong policy changes and high quality assets with more than 90 percent portfolio with committed occupancy linked to REITs, they should show better interest levels in future listings,” Mehta said. (Reporting by Swati Bhat; Editing by Uttaresh.V)

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