India's Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) market is set to experience significant growth, potentially attracting an additional ₹11.6 lakh crore (approximately $139 billion USD) in capital by the year 2030. This projection comes from a recent report by Avendus, titled 'Trust the Structure: REITs, InvITs and the Real Return', which anticipates a surge in allocations from both institutional and retail investors into these listed real assets.
The report suggests that this substantial capital influx will propel the next phase of development within India's business-trust ecosystem. By 2030, the total Assets Under Management (AUM) for REITs and InvITs could exceed ₹20 lakh crore, with an annual primary market opportunity surpassing ₹1 lakh crore.
Key Sources of Capital
According to the Avendus analysis, several investor segments are poised to contribute to this growth:
- Mutual Funds: Expected to be the largest source, contributing around ₹4.5 lakh crore.
- Insurers: Projected to add ₹3.2 lakh crore.
- Pension Funds: Anticipated to channel ₹2.2 lakh crore.
- Retail and High-Net-Worth Individuals (HNIs): Could collectively contribute ₹1.2 lakh crore.
- Foreign Investors: Estimated at ₹30,000 crore.
- Corporate Treasuries: Expected to invest ₹20,000 crore.
A significant observation from the report is that domestic long-duration institutional investors currently utilize only about 7.5% of their permissible regulatory limits for REITs and InvITs. Fully leveraging these limits could redirect nearly ₹7 lakh crore into this asset class, a figure roughly 2.6 times the current free-float market capitalization of Indian REITs and InvITs.
Regulatory Catalysts and Market Evolution
The report identifies several potential regulatory changes and market developments that could unlock further capital. For instance, granting the Employees' Provident Fund Organisation (EPFO) greater access to non-PSU-sponsored trusts, even with a modest 2% additional allocation, could channel over ₹60,000 crore. Similarly, a 1% increase in insurance allocation could inject another ₹60,000 crore into the market.
Further broadening market access are potential developments like the introduction of REIT/InvIT Exchange Traded Funds (ETFs) and the inclusion of these instruments in global indices. A 2% allocation from current passive AUM could channel over ₹24,000 crore, while a 2% global index weight might attract more than ₹1 lakh crore.
The authors emphasize that the opportunity extends beyond mere capital flows, highlighting the readiness of a deep and diverse pool of patient, long-duration capital to fuel the growth of REITs and InvITs in India. While the Indian REIT and InvIT ecosystem is still in its nascent stages, robust regulation, increasing domestic savings, and a growing inventory of monetizable real assets are laying a strong foundation for a more profound institutional market.