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Is Embassy Office Parks REIT worth investing in? Here's what experts have to say

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By Manisha Natarajan  Mar 18, 2019 4:56:26 PM IST (Published)

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The Embassy Office Parks real estate investment trust's (REIT) initial public offering (IPO) is India’s first REIT listing and is sponsored by Global investment company Blackstone and realty firm Embassy. It is opened for subscription on Monday.

The most interesting aspect of Embassy Office Parks REIT is the portfolio of commercial assets it owns. It has a 32.7 million square feet of seven global quality office parks in India’s fastest growing cities — Bengaluru, Pune, Mumbai and Noida; 160-plus marquee tenants such as JP Morgan, Google, Microsoft, Accenture, PWC, Rolls Royce.  Almost half of this REIT’s portfolio is rented out of Fortune 500 companies on an average lease life of seven years.
CNBC-TV18 caught up with Samir Jasuja, co-founder, PropEquity and Arvind Nandan, executive director-Research, Knight Frank, to answer the big question on everyone's mind, is this REIT worth investing in? What will be the post-tax returns on this investment? What sort of risks are associated with investing in this REIT?
Samir Jasuja said, "We are expecting around 7.5 percent rental yield or dividend payments going in the hands of the consumers or subscribers. However, we do also anticipate a significant amount of capital appreciation that this REIT is particularly going to witness over the next 2-3 years because 20 percent of the assets in this REIT is under construction and they are excellent IT parks, the demand of which is huge. Rentals are going up in those areas and that will also provide a significant opportunity for capital appreciation which we are anticipating in addition to the 7.5 percent by about 7 percent odd annualised."
Arvind Nandan said, "The pressure on rentals is practically not visible right now. If at all the rentals look to firm up even further. We have seen that in 2018 that while the residential sector was under pressure, the commercial sector had been going up. Coupled with the fact that in Bengaluru particularly and in many other cities, the vacancy rates have been significantly low. Bengaluru is actually 5 percent or lower. With that kind of situation, you do not see the pressure on rentals building up anytime soon, not at least in the next two to three years. So, all in all, if you look at all these things together, I think the timing is very good and it should get investors the yield or the kind of appreciation that we have been speaking of right now."

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