Embassy Office Parks Shares Jump In Market Debut Of India's First REIT

Shares in Embassy Office Parks, India's first-ever real estate investment trust (REIT), rose more than 8 per cent on their market debut on Monday, renewing expectations for more such issues in the coming months. The unit closed at Rs 314, marking a gain of 4.67 per cent, after touching a high of Rs 324.80, 8.3 per cent above its initial public offering (IPO) price of Rs 300.

Real estate developer Embassy Group and US-based Blackstone Group are the sponsors of this REIT, which comprises 11 office assets in the cities of Bengaluru, Mumbai, Noida and Pune.

REITs would allow for greater participation from retail investors in the asset class, said Shishir Baijal, chairman and managing director at Knight Frank India, a real estate consultancy firm.

"The commercial office space segment has been growing from strength to strength over the past few years. We expect this momentum to sustain in the near future, which would encourage more participants to enter the REITs market, which in turn, will improve the fund flow into the sector," he added.

Earlier this month, investors bid for about 18.35 crore units, or 2.57 times the 7.13 crore on offer.

"The success of REITs in India will depend on stable dividends and valuations. Investors will be looking at post-tax returns in dividends and subsequent capital gains," said Surendra Hiranandani, founder and director, House of Hiranandani.

Parth Mehta, managing director at Paradigm Realty, however, feels confidence in the real estate sector from institutional investors is still a bit laggard and has caused a timid listing for the REIT.

"We feel with improved transparency in real estate overall, on the back of strong policy changes and high quality assets with more than 90 percent portfolio with committed occupancy linked to REITs, they should show better interest levels in future listings," Mr Mehta said.