India’s REIT and InvIT Market Poised for Rs 11.6 Trillion in New Investments, with AUM Projected to Double to Rs 20 Trillion by 2030, According to Avendus Capital
The report from Avendus Capital forecasts a transformative trajectory for India’s Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InvIT) market, predicting an additional investment potential of INR 11.6 trillion within the next five years. By 2030, the assets under management (AUM) for this sector are expected to exceed INR 20 trillion. This growth is underpinned by structural reforms and increased interest in stable, income-generating investments as rising interest rates elevate the importance of real assets in portfolios. The document highlights that the current climate positions REITs and InvITs as essential tools for inflation protection and reliable income streams, compelling institutional investors to reassess their allocations.
Key contributors to this anticipated growth include domestic mutual funds and insurance companies, which are poised to inject INR 4.6 trillion and INR 3.2 trillion, respectively, by 2030. Notably, domestic pension funds are expected to contribute another INR 2.2 trillion. Cumulatively, institutional investors have only utilized 7.5% of their regulatory investment limits in this asset class, representing a significant opportunity of INR 7 trillion for further capital deployment. As the sector matures, it is expected that investments will increasingly focus on metrics like equity internal rate of return (IRR), which currently trends at a premium to 10-year government securities across various segments.
The analysis identifies various sectors poised for growth, including logistics, telecom, and renewables, with a projected doubling of their total addressable market (TAM) from INR 10 trillion by 2026. Despite this promising future, India’s REIT and InvIT market only represents approximately 1.5% of GDP, starkly lower than the 5% to 12% seen in more developed markets such as the U.S. and Japan. This underpenetration suggests immense expansion potential as India continues to evolve its capital-raising landscape for real assets.
Finally, emerging investment avenues are set to further diversify participation within the REIT and InvIT landscape. The growth of passive ETF products could attract an additional INR 240 billion with only a 2% increase in allocations. Moreover, the prospect of global index inclusion may unlock over INR 1 trillion in investments within the next five years, making these markets increasingly appealing to foreign institutional investors, retail participants, high-net-worth individuals, and family offices, in addition to the institutional pool. Collectively, these factors point towards a robust multi-year growth trajectory for India’s REITs and InvITs, highlighting their critical role in capital market development.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova team.)