SEBI’s equity tag for REITs a game-changer; market could double in size, say industry leaders

India’s Real Estate Investment Trust (REIT) market, currently valued at just under $20 billion, has the potential to double in the coming years, said Sundareswaran S, Managing Director at Morgan Stanley.“Today we are probably just shy of $20 billion. We think that number has the potential to meaningfully go up. Can it double from what it is today? I’m hoping so in the not-too-distant future,” he told CNBC-TV18.

The optimism follows SEBI’s decision to reclassify REITs as equity, a move that both Sundareswaran and Ramesh Nair, MD & CEO of Mindspace REIT, described as long overdue. “This was always intended to be an equity product. Obviously, SEBI wanted to give it some time before that classification came through. The impact is not just on the flows; ultimately, this is an equity product, and this is where it should be categorised,” Sundareswaran said.

Nair called the move “a big step from the government’s point of view, and very positive for our sector,” pointing out that equity classification will allow more index funds, ETFs, and passive funds to consider REITs. Over the last three days since the announcement, listed REITs have already gained significantly.
Investor returns have also been strong, with Mindspace REIT delivering a 36% total return in the past year, a 27% annualised return over two years, and 15.8% since listing five years ago. “In a world with so much volatility and worry, a 36% return over the last year is fantastic,” Nair said, while stressing the need for greater awareness. The number of investors has grown from a few thousand in 2019 to about 3 lakh today, with mutual funds investing close to ₹30,000 crore and insurance companies around ₹10,000 crore.Nair also highlighted the advantages of REITs compared to direct real estate ownership: “You get dividends on a quarterly basis, it’s an inflation hedge, professionally managed, highly transparent and compliant, and most importantly, it has delivered strong returns.”

Despite global uncertainty around tariffs, demand for commercial real estate in India remains strong. Net leasing has risen 28% in the past six months and gross leasing 18%. “Every quarter, every IPC report shows record leasing. Over the last seven to eight quarters, we’ve been seeing that,” Nair noted.

Both leaders agreed that REITs have shown resilience since their introduction in India. “Since the first REIT got listed five to six years ago, despite Covid and other challenges, REITs have been resilient and continued to deliver returns,” Sundareswaran said.

Watch accompanying video for entire discussion.