Why Keki Mistry thinks REITs are a good investment option

Ex-HDFC CEO believes Real Estate Investment Trusts (REITs) are very important, particularly for those who may not have the funds to invest directly in real estate because of the high prices.

REITs allow you to invest in real estate assets, such as office buildings, and shopping malls without directly owning them.

In a conversation with CNBC-TV18, Keki Mistry, former CEO of HDFC, said REITs help owners convert illiquid assets into liquid assets.

While there can be various kinds of REITs, he noted, in India, there are REITs only for commercial real estate or for retail or shopping malls etc. and not for residential.

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Mistry pointed out that REITs are very popular in other countries, especially in the US, where the total value the market is approximately $50 trillion, with listed REITs making up about $1.8-1.9 trillion of that amount.

“In India, on the other hand, there are only four listed REITs. In the US there are close to 200 listed REITs, just under 200. So, there is a huge difference between India and the US. The total market cap of all the listed mcap in India is about $4 trillion, roughly, whereas the market cap of all the listed REITs is under $10 billion,” he added.

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He expects an increase in the market capitalisation of REITs in India as more developers, who have developed large amounts of commercial real estate that is leased out, will eventually want to convert them into REIT structures.

Besides the US, REITs are also popular in the United Kingdom (UK), Japan, and Singapore.

Mistry is optimistic about the Indian real estate sector.

“I believe the growth opportunity in India is phenomenal. We are a very under-penetrated market, mortgages in India are only 11% of the GDP. In the Western world mortgages are 50-60-70% of GDP. China is about 24-25%. India is only 11%. So, there is so much scope to grow,” he added.

For the entire interview, watch the accompanying video