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January 31, 2019

In India, this could be the year of the REIT, and with it will bring a boost for the country’s office market.

Real estate investment trusts, or REITs, are still new in India. But that is set to change this year with a Blackstone Group-led effort to float the country’s first such investment vehicle on the stock market, a move that could pave the way for more.

Embassy Office Parks – a joint venture of U.S. private equity firm Blackstone Group and India-based Embassy Group – is expected to launch an initial public offering in the early part of this year.

“Everybody has been waiting for this one a while,” says Ramesh Nair, CEO and Country Head, JLL India. “I think it could be a watershed moment.”

All eyes are on what the introduction of REITs could mean.

“There is a high chance that the new government formed post the general elections will continue to provide for fresh investments into REIT-able projects by further easing of REITs regulation,” says Nair.

This signals good news for the country’s office market, especially with the potential for further easing of REIT regulations.

With an increasing number of REITs, the market will witness a strong focus on the development of quality offices that meet the aspirations of new age occupiers. As a result, ”the market will see more such supply in the coming quarters. Hence, there will be a change in the proportion of Grade A stock in the decentralized markets. This would result in the emergence of alternate Central Business Districts (CBDs) in and around cities,” Nair adds.

India’s economic growth continues to help the office market to expand further and attract more investors.

In its December 2018 forecast, the Reserve Bank of India (RBI) stated that growth will accelerate further to 7.5 percent in first half of 2019 from the 7.4 percent of the current fiscal.

For 2019, REITs are not the only big ticket on the cards. An election that will be held between April and May is already impacting decision making, while the rise of ecommerce – and the retail industry’s scramble to adapt – is reshaping industrial markets.

Click to read about how investors are responding to India’s changing tastes.

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Ramesh Nair

Country Head, JLL India

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