NEW DELHI: The leasable area for domestic commercial real estate investment trusts (REITs) is forecasted to grow by 40-45 million sq ft, reaching 190-195 million sq ft by the end of the next fiscal year, as reported by Crisil Ratings.
This growth will be fueled by planned additions from existing REITs as well as the recent launch of a new REIT, according to the rating agency.
About 16 million sq ft of the projected increase will stem from the newly listed REIT.
The agency indicated that inorganic expansion through acquisitions will lead the way for REIT growth, as this mitigates construction-related risks. Since the first listing seven years ago, approximately 75% of asset additions by office REITs have come through acquisitions, projected to continue through FY26.
Support for growth is also expected from the right of first offer on assets developed or acquired by sponsors on their platforms, the agency added.
“Demand for commercial office space is being driven by flexible workspace operators, banks, financial services and insurance firms, as well as global capability centers across various sectors. Coupled with their prime locations and high quality, this will enable REITs to maintain occupancy levels at a stable 92-93% for the fiscal year, outperforming the overall commercial office market,” stated Gautam Shahi, senior director at the firm.
The company anticipates stable occupancy and contracted rental growth to sustain REITs’ EBITDA margins around 70%, bolstering cash flows.
However, due to the distribution of most surplus cash flows to unitholders, asset acquisitions will largely depend on debt financing, according to the agency.
Even so, the overall loan-to-value ratio is expected to hold steady at 26-28% through FY28, similar to levels seen in March 2026. Any increase in debt is projected to be balanced by a corresponding rise in gross asset value based on discounted cash flows.
Office REITs benefit from diversified asset profiles across various sectors and locations, with the top three sectors and regions accounting for approximately 70-75% and 60-65% of the total leasable area, respectively.
