Chinese, Indian, Korean REIT markets to double in size by 2025: JLL

New REITs added nearly US$20b in market cap in the last two years alone.

New REITs in China, India, and Korea added nearly US$20b in market capitalisation in the last two years, and JLL expects this momentum to continue over the next three years.

“As corporate governance and transparency improve, more institutional investors will gain confidence to invest in these markets with a clear exit strategy. Furthermore, as the ownership of real estate is re-distributed to insurance, pension and investment funds, financial stability will be enhanced, reducing the need for regulatory intervention in these markets,” the analyst said.

Here’s more from JLL:

In China, eleven pilot REITs have been listed since June 2021, holding infrastructure, logistics, business park and life science assets. Affordable rental housing has also been added to the pilot. This can significantly increase the size of the China REIT market in the near term. Globally, multifamily and rental residential is one of the largest institutional investment asset classes. Multifamily REITs make up 15% of the US REIT market. 

In India, three REITs were listed since 2020 and the first REIT, Embassy REIT, undertook its first secondary equity raising in Q4 2021. India’s third REIT, Brookfield REIT, was listed in 2021 and attracted more domestic institutional investors — evident of a fast-maturing asset class finding wider domestic acceptance. Blackstone successfully rationalised their stake in Embassy REIT to 32% in 3Q  2021, highlighting the attractiveness of REITs for foreign investors who earlier found large-scale exits difficult to come by. 

India’s regulator, SEBI, reduced the minimum application value of REITs and revised minimum trading lots to improve market liquidity. Other measures to improve financial access for REITs include enabling FPIs to invest in debt instruments of REITs and providing tax reliefs by exempting TDS on dividends paid by REITs. 

Korean REITs’ market capitalisation grew at a 73% CAGR in the last three years and we expect a further 50% growth in 2022 to c. US$10 billion. For 2022, we expect at least four new REITs to be listed, and the existing REITs to grow via acquisitions. Larger REITs (with over US$1 billion market capitalisation) should continue to outperform the market as their sponsors — chaebols and financial heavyweights — provide assets for growth and facilitate financing at competitive rates.