Sustainability-Focused Real Estate Investment Trusts (REITs): A New Frontier in the Indian Market

The Emergence of REITs in India

The Securities and Exchange Board of India (SEBI), the regulatory body for securities in the country, issued guidelines for REITs in 2014. Yet, the response to this new form of investment vehicle was lukewarm, and the first operational REIT only started in 2019. To date, India is home to just three REITs: Embassy Office Parks REIT (Bengaluru), Mindspace Business Park REIT (Mumbai), and Brookfield India Real Estate Trust (Mumbai). None of these REITs have a specific focus on sustainability in the real estate market.

The COVID-19 pandemic has delayed several REITs that were in advanced stages of development. However, with a recovering economy, the issuance of REITs is expected to increase in the coming years.

The Need for Sustainability-Focused REITs

A push towards sustainability-focused REITs could be a game-changer for the Indian market. Such REITs would not only cater to the growing investor demand for sustainable investment options but also contribute to the broader goals of energy efficiency and carbon neutrality.

Given the considerable capital requirement in the next decade for developing green buildings and infrastructure, sustainability-focused REITs could serve as an excellent vehicle for mobilizing the necessary funds while providing investors with the opportunity to invest in the sustainable real estate market.

Embassy REIT: A Potential Game-Changer

A case in point is the Embassy Office Parks REIT, India’s first publicly listed REIT. While it does not have a specific sustainability focus, it provides a successful model for what a sustainability-focused REIT could look like.

The Embassy REIT comprises a large office portfolio spread across Bengaluru, Mumbai, Pune, and Noida. It could play a significant role in driving sustainability in India’s real estate market by leveraging its scale and diversity to incorporate green building standards across its portfolio. Initiatives like retrofitting existing buildings for energy efficiency, utilizing renewable energy sources, and prioritizing waste management could set a powerful precedent for future sustainability-focused REITs.

Final Thoughts

With the right policy direction, a shift towards sustainability-focused REITs could open up a new frontier in the Indian real estate market. It would not only provide a fillip to sustainable infrastructure development but also meet the growing demand for responsible investment options. The future of the Indian real estate sector seems to be on a promising path, one that is environmentally responsible and economically rewarding.