A rise in small-scale investments will define the future of real estate. Retail investors, even before the pandemic hit, were searching for affordable alternatives to rising real estate prices. The pandemic has accelerated this interest in smaller investments.The Securities and Exchange Board of India has reduced the minimum investment value for Real Estate Investment Trusts to Rs 10,000-15,000 from Rs 50,000. This decision is likely to open up the market to small and large retail investors.In early 2019, India was the first country to list a REIT. Since then, REITs are one of the most attractive investment options. Although returns from other stable investment avenues are uncertain after COVID-19's impact, REITs still perform well as 80 percent of their assets must be operational and generate income.It is expected that the office market will be as lucrative after the pandemic has passed. Although there will be some short-term pressure on rental cashflows, India is still a top global IT outsourcing destination. Office real estate will remain a resilient, low risk, and high-return asset. As a safer investment option, REITs will be preferred over equities and mutual funds.The strength of the commercial real estate market in the country is a key factor in maintaining a positive outlook on REITs. Reit-able stock accounts for approximately 50 percent of Grade A office spaces. Office stock will reach 1 billion square feet within six to eight years. It is possible to expect nearly 100 million square feet. In the next two-years, India will list almost 100 million sq. ft.The Indian real estate market has been open to FDI since the liberalization of regulations in the last decade. This has made it more attractive to invest in Indian REITs. In India, approximately 600 million square feet of Grade A/B office stock is found in major cities. About 10 landlords and institutions own approximately 900 million sq. ft. Some are family-owned, others are MNC landlords and some are REITs.As these companies have access to capital and expertise, this percentage will rise. These 10 institutions may also see consolidation.SEBI's decision to reduce the minimum application value will make REITs more attractive for retail and small investors. SEBI also decreased the minimum trading units to close the gap between small investors, big institutions and large institutional investors.Also, REITs are now able to raise money via the bond market. REITs will be more popular than traditional debt instruments as developers will no longer need to rely on them for funding. Investor trust will be increased as developers will need to comply with SEBI and RERA (Real Estate (Regulation and Development) Act).Real estate investors and owners expect long-term negative effects from the COVID-19 epidemic on the real estate markets. SEBI announced that it has encouraged more investors to join the market. Increased retail investor participation will lower institutional allotment and reduce volatility in commercial real estate markets.
