Indian REITs poised for a step-change — yields, listings and the road ahead

India’s REIT market is no longer a niche experiment. What began with a single REIT listing in 2019 has, in six years, built a market that delivers distribution yields of 6–7%, attracts global capital and still carries large untapped potential—a rare combination that the new ANAROCK–CREDAI report details in full. The message is simple: the engine is running, the garage is full of vehicles, and only a few have been driven onto the highway so far.

A strong, data-backed starting point

The report places the Indian REIT market’s market capitalisation at around $18 billion as of August 2025, with a projection to cross $25 billion by 2030 as more assets are securitised and new REITs list. These headline numbers are backed by robust operating fundamentals: Grade A office demand has regained momentum, with net absorption of roughly 27 million sq ft in H1 2025 — already more than half the 2024 full-year tally — underpinning cash flow stability for office-centric REITs.

This yield premium (6–7% vs. lower yields in mature markets) reflects a trade-off many global investors find attractive: higher running income today combined with room for capital upside via rental escalation, refurbishment and re-positioning of ageing stock. The report notes typical rental escalation assumptions of 3–5% per annum alongside potential uplift from asset modernisation.

Why India still looks like opportunity territory

Perhaps the most striking finding: listed REITs account for only 20% of institutional real estate in India — a share that is tiny compared with the US (96%) or Singapore (55%). Put differently, of approximately 520 million sq ft of REIT-worthy Grade A office inventory across the top seven cities, only 32% (166 million sq ft) is currently listed. That gap is the core of the upside case: more assets can be monetised, diversified and offered to public investors — if sponsors choose to do so.

Geography matters too. Southern metros (Bengaluru, Hyderabad, Chennai) hold 313 million sq ft of the REIT-worthy stock but have low listing penetration. This leaves city-specific plays for investors and room for further REIT formation beyond the top three sponsors that currently dominate market share.

Diversification: logistics and data centres move centre stage

The report flags a clear structural shift: Indian REITs are office-heavy today, but both industrial/logistics and data centre assets are fast becoming REITable. Globally, data-centre REITs were valued at about $250 billion in 2024 and are expected to double in seven years; India’s digital adoption, cloud migration and AI workloads make the country a natural candidate to capture a slice of that growth.

The ANAROCK–CREDAI analysis points to a 60% YoY surge in industrial and logistics leasing in H1 2025, 30% YoY growth in warehousing absorption, and a 3x jump in institutional investment into logistics and warehousing (to about $2.5 billion in 2024). Those are not just flow numbers — they signal a maturing investment pipeline that REITs can tap to broaden income streams and reduce concentration risk.

For investors, logistics and data centres bring different risk/return profiles: logistics tends to offer predictable, inflation-linked cashflows tied to e-commerce and supply-chain dynamics; data centres deliver higher structural growth but require heavy capex and specialised management. A gradual, staged diversification strategy — core office cash flows funding selective entry into logistics and hyperscale data assets — is what the report suggests India’s REIT sponsors should consider.

Regulatory and tax tailwinds and why they matter

Regulation has been an enabling force. SEBI’s REIT framework (introduced in 2014) and subsequent refinements — including steps in 2024–25 to reduce minimum lot sizes, simplify capital gains handling and introduce dividend tax exemptions — have improved liquidity, widened the investor base and raised governance standards. The report emphasises that mandatory distribution norms and leverage caps (e.g., the 49% leverage ceiling) create investor reassurance, which in turn narrows the yield premium investors demand.

However, the report is clear that policy consistency is critical. Tax changes that are predictable and designed to broaden retail participation will accelerate REIT formation; sudden, adverse changes could slow the pipeline.

Risks and caveats: concentration, ageing stock and execution

ANAROCK–CREDAI does not sugarcoat the risks. India’s REIT market remains concentrated: the top three sponsors hold a large share of listed stock, a typical feature of nascent markets that can amplify sponsor-specific risks. Further, about 100 million sq ft of Grade A stock is ageing across the major metros; while refurbishment can lift rents materially (the report models uplift ranges from 10% to as much as 20–30% in some cases), the execution requires capital, planning and temporary yield dilution during upgrades.

Macro risks — GDP slowdown, outsourcing demand shocks, or a weakening currency that affects foreign flows — would hit listed units too, particularly because yields already price in a growth premium. Sponsors need to show disciplined capital allocation to maintain credibility.

What investors and sponsors should watch next

Three practical watchpoints emerge from the analysis:

1. Pipeline of new REITs: The report expects three more REITs over the next four years; each successful listing will deepen the market and test investor appetite.

2. Diversification moves: Early movers into logistics and data centres will set pricing and structuring precedents; careful asset selection and transparent reporting will be decisive.

3. Refurbishment programmes: Sponsors who can modernise ageing assets without excessive yield dilution stand to secure rental premia and capital appreciation.

Bottom line — a market at the inflection point

The ANAROCK–CREDAI report paints a balanced but optimistic picture: India’s REIT market offers attractive running yields and a clear runway for scale and diversification. The structural backdrop — rising office demand from GCCs and technology firms, booming logistics from e-commerce, and accelerating data-centre needs — gives the thesis teeth. Yet the transformation from a concentrated, office-heavy market to a diversified REIT ecosystem will depend on sponsor intent, policy stability and execution discipline.

For investors seeking income with upside, Indian REITs are no longer a speculative fringe; they are a maturing asset class that rewards selectivity. For sponsors and policymakers, the task is to convert the available stock — 520 million sq ft of Grade A space — into listed, institutionally managed assets. If that happens, the projections to cross $25 billion by 2030 will likely look conservative.