REITs And InvITs Gain Popularity Amongst Investors Due To Weak IPO Market Conditions

REITs and InvITs are becoming the go-to investment avenues for investors in the country owing to volatility in the markets and low enthusiasm for IPO investments, according to a Moneycontrol report.

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As per the report, investors have become hesitant to invest in the regular stock market IPOs on account of valuation issues and uncertain gains from listing, while the demand for REITs and InvITs, which offer predictable yields, is rising.

Pranav Haldea, Managing Director at Prime Database, told Moneycontrol that REITs and InvITs are attracting investors because of stable cash flows and yield visibility during volatile market conditions. He added that traditional IPOs remain dependent on growth expectations and valuation comfort.

Bhavesh Shah, Managing Director and Head of Investment Banking at Equirus Capital, said in comments carried by Moneycontrol that investors are currently prioritising predictable returns over volatile equity performance. He stated that REITs and InvITs are being viewed as yield-oriented investment products despite not being completely risk-free.

Developers Use REITs And InvITs To Monetise Assets

According to the Moneycontrol report, developers and infrastructure companies are increasingly using REITs and InvITs to unlock value from operational assets, recycle capital and reduce debt.

India’s listed REIT and InvIT market has expanded steadily over the past few years as sponsors look for efficient monetisation routes for mature commercial real estate and infrastructure assets.

Sharad Mittal, Founder and CEO of Arnya Real Estate Fund Advisors and Co-Chair of the Real Estate Council at IVCA, spoke to Moneycontrol that REITs and InvITs function as a yield-plus asset class positioned between debt and equity in investor portfolios.

Mittal also stated that REITs and InvITs have outperformed the Nifty 50 during the past two years, although they should not be treated as direct substitutes for equities over the medium and long term.

The Moneycontrol report said retail participation remains stronger in REITs compared with InvITs because commercial real estate assets are easier for investors to understand.

Office REITs Continue To Dominate Market

According to Moneycontrol, India’s REIT market continues to be dominated by office assets, although industry executives expect more diversified offerings in the future.

The report noted that office REITs currently account for around 10%-12% of the total office stock across India’s top eight cities, indicating room for future expansion.

Bagmane REIT, which is scheduled to list on May 15, has received strong investor response with a high number of applications, reflecting growing interest in the segment.

According to the Moneycontrol report, industry participants expect India’s REIT and InvIT market to expand further as participation from pension funds, mutual funds, insurance firms and retail investors continues to increase.