Analysing the REITs in India

Top 3 REIT stocks in India 2021

REIT is a company which owns or finances a portfolio of income generating real estate

assets. In our previous blog post about REITs, we had given an introduction as well as looked at the advantages and disadvantages of REITs. Now in this post we will look into and analyse the REITs available in India for the investors.

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There are only 3 REITs in India as on date, they are:

Embassy REIT:

Embassy REIT is India’s first publicly listed Real Estate Investment Trust. They are sponsored by Blackstone and Embassy group and are one of the largest comparable office REIT in Asia by area. Embassy REIT owns and operates a 42.4 million square feet portfolio of eight infrastructure-like office parks and four city center office buildings in India’s best-performing office markets of Bengaluru, Mumbai, Pune, and the National Capital Region. Embassy REIT’s portfolio comprises 32.3 msf completed operating area and is home to over 190 of the world’s leading companies. 

Their portfolio is concentrated around Bengaluru which has 72% of the asset value, followed by Mumbai with 11% & Pune with 10%. As of 30 June 2021, their occupancy is about 88.8% and their WALE (Weighted Average Lease Expiry) is about 6.9 years. The top 10 tenants contribute 39% of rentals.

Their revenue from operation in the last 3 yrs is about CAGR of 13.56% and their LTV (loan-to-value) is about 23%, which is the highest among the 3 REITs.

REIT manager is intending to refinance existing zero-coupon bonds of Rs. 45bn to coupon bearing bonds from Nov 21, this will result in optically lower REIT NDCF distribution of Rs1.5/unit in FY22E and Rs3.3/unit each in FY23E and FY24E. At CMP of Rs356/unit, this implies distribution yields of 6.0% in FY22E, 6.1% in FY23E and 6.8% in FY24E.

Mindspace REIT:

Mindspace REIT was the 2nd REIT to be listed in India and it was listed on Aug 12, 2020. It is sponsored by K Raheja Corp Group, which has contributed shares in eight SPVs to the REIT in lieu of units in the latter. The asset portfolio of the REIT has a total leasable area of 31.2 mn sqft, including a completed area of 23.8 mn sqft, an under-construction area of 1.8 mn sqft and 5.6 mn sqft of planned area for future development.

Their portfolio is large and diversified and is present in the Mumbai Region (41%), Hyderabad (40.4%), Pune (16.0%) and Chennai (2.6%) which are some of the key office markets of India. As of 30 June 2021, their occupancy is about 84.4% and their WALE (Weighted Average Lease Expiry) is about 6.6 years. Top 10 tenants contributed to 38.6% of rentals.

Their revenue from operation in the last 3 yrs is about CAGR of 8.86% and their LTV (loan-to-value) is about 14.9%, which the lowest among the 3 REITs. However, planned capex and aggressive acquisition plans can increase the leverage and reduce the financial flexibility.

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Brookfield India REIT:

Brookfield India REIT is the newest of the 3 REITs, it was listed on February 16, 2021. It is India’s only institutionally managed public commercial real estate vehicle. It is sponsored by Brookfield Asset Management, one of the world’s largest alternative asset managers with approximately US$600 billion in assets under management, as of March 31, 2021.Their Portfolio has four large campus-format office parks, which are “business-critical” and totals to 14.0 M sf, comprising 10.3 Msf of Completed Area, 0.1 M sf of under construction area and 3.7 M sf of Future Development Potential.

Their portfolio is well diversified and is present in Gurugram which has 38% of the asset value followed with Mumbai and Kolkata with 22% and Noida with 18%. As of 30 June 2021, their occupancy is about 91% and their WALE (Weighted Average Lease Expiry) is about 6.5 years. Top 10 tenants contribute to 75% of the leased area.

Their revenue from operation in the last 3 yrs is about CAGR of 1.63% and their LTV (loan-to-value) is about 18%.

In Apr 2021, Brookfield had converted Rs. 1010 Cr of Compulsory Convertible Debentures held by REIT into equity share. This is a repayment of shareholders loan. It has increased the tax free portion of the NDCF from 15% to 30%.


 Embassy REITMindspace REITBrookfield India REIT
WALE (years)
Revenue from  operation (3Y)13.56%8.86%1.63%
Portfolio (msf)42.431.214
Gross Asset Value (GAV) in Rs466 bn246.17 bn115 bn
Mark-to-market (MTM)28%13.80%31%

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The Indian REIT market is poised to enter a period of prolonged growth after 2021. The growing middle class in India is enjoying rising income levels and since the ticket size to buy properties is high, they will turn to REITs as a mode of real estate investment which gives them exposure to commercial real estate without the hassle of paperwork. Real estate is the second largest employer and its contribution to Indian GDP is expected to reach 13% by 2025. This makes it a high priority sector and the current government continues to introduce major reforms. Further to strengthen investor interest in REITs, the Union Budget 2021-2022 announced further measures to ease financial access by enabling FPIs to invest in debt instruments of REITs, and separately providing tax relief by exempting TDS on dividends paid to REITs. All of these reforms and upcoming IPO’s of many REITs in India are expected to make it an attractive mode of investment for Investors.

The final verdict after evaluating the 3 REITs is that, it depends on the investors risk profile. The Mindspace REIT is a good investment for mid to long term, balanced profile investors and Embassy REIT is a good investment for conservative long term investors, and Brookfield India REIT is a good investment for mid to long term, aggressive investors. Even though the REIT sector might experience some short term weakness, the long term outlook remains strong.

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