SM REITs to Unlock ₹68,000-71,000 Cr Monetisation Opportunity: ICRA
Rajeshwar Burla, Senior Vice-President & Group Head - Corporate Ratings, ICRA, emphasized that SM REITs offer a chance for small Grade A and most Grade B office developers to monetise their investments. Additionally, the formalisation of fractional ownership platforms (FOPs) is anticipated to broaden market acceptance. However, the minimum unitholding requirement for SM REITs may hinder scalability.
As of December 2023, the total Grade A office supply in the top seven cities stood at 980 msf, with Grade B office supply at 115 msf. ICRA estimates that SM REIT-ready office space comprises approximately 52-53 msf, indicating significant potential for SM REIT listings. At a cap rate of 8-8.5%, this translates to a monetisation opportunity of ₹67,000 – 71,000 crore across the top seven cities.
Key highlights of the report include SEBI's announcement to regulate fractional ownership platforms (FOPs) offering real estate assets through SM REITs. The regulatory oversight aims to enhance investor participation and ensure compliance. Currently, the assets under management (AUMs) for various FOPs are estimated at ₹5,000 crore.
ICRA maintains a Stable outlook on India’s commercial office sector, anticipating a 4-5% growth in net absorption across the top six cities in FY2025. Despite a significant supply influx of around 60-62 msf in FY2025, vacancy levels are projected to remain around 16.0-16.2%, largely consistent with the previous year.
