REIT ASIAPAC
other debt instruments generally don’t experience that. Hence,
it’s not a surprise why REITs are so appealing to the market.
“Our REIT is backed by 160 corporate leases.
We’re in a market where rentals and capital
values are still very low in relation to any
global market comparison.”
Can you just talk about what you think of
India’s developments in the REIT market sector.
How do you see it growing in the next few
years now that you’ve made the first move?
Obviously, we think REITs are a great product. We believe
that they are predictable, less volatile, and are asset-backed.
Our REIT is backed by 160 corporate leases. We’re in a market
where rentals and capital values are still very low in relation to
any global market comparison. We believe that the demand and
supply are nicely balanced. There are many investors domestically
and internationally who want to be able to play India’s growth
story, and the country’s real estate. REITs provide a high-level
The spread between the dividend yield that you’re
offering, and the government bond yield is rather
thin. I know that you’re oversubscribed as well, but
how have you managed to overcome this relative
comparison that investors make between the yield
on a REIT and the yield on a debt instrument?
Embassy One. (Bengaluru)
It’s fairly straightforward—it’s about growth. Firstly, there is
that premium on our initial yield over government securities.
However, the key catalyst is the contracted growth in our rental
income, which directly translates into investors’ quarterly
distributions. At the end of a 10-year government security, you’ll
get your $100 back, and in the interim, you would receive that
7-7.5% income annually at the end of the 10-year term. With us,
rents are expected to grow from our initial 8%, and the three-year
forecast in our prospectus showed a 15% compounding growth.
At the end of that ten years, if that tenant moves out when the
lease expires or they stay, we’ll get a newly updated market
rental. So, you have the rental growth that often translates into
increasing asset value over time. Government securities and
of predictability and transparency with a strong focus on good
governance. Companies are here not just for the low rent; they’re
here for the talent in this technologically-connected globalised
country. And that’s why our investors buy into commercial real
estate that’s supporting the global economy.
We believe that we’ve made a fair amount of effort to start
the REIT market, and now for us the job is to deliver on those
projections. We believe that others will endeavour to replicate
that. It’s a great shift for the Indian real estate sector and has
the potential to bring more liquidity to the sector, more cost-
effective capital, higher levels of transparency, and governance.
Embassy REIT is a milestone in the growth of India’s real estate
industry.
8
9