Indian REITs yield higher than US, Singapore, remain compelling bet’: Anurag Mathur

Indian real estate investment trusts (REITs) continue to shine on the global stage, offering distribution yields of 6–7% — higher than those available in mature markets such as the US and Singapore.

According to Anurag Mathur, CEO of Savills India, this yield premium, backed by strong fundamentals, resilient asset performance, and expanding opportunities in Grade-A offices, logistics, and data centres, makes Indian REITs a compelling choice for both domestic and international investors. Edited Excerpts –

Q) Thanks for taking the time out. CREDAI Natcon 2025 report highlighted that India's real estate market to touch $5–10 trn by 2047. What are your views?

A) The report presented at Natcon 2025 projects India’s real estate market to reach a valuation of between $5 trillion and $10 trillion by 2047, contributing nearly one-fifth of the nation’s GDP.

This projection is underpinned by rapid urbanization, demographic transitions, infrastructure investment, and evolving regulatory frameworks, creating a robust foundation for sustained sectoral growth.

This expansive market value will not just reflect asset size but also the enhanced quality of urban living with climate-resilient infrastructure, affordable housing, smart city initiatives, and sustainable development.

At Savills India, we see this vision as a powerful illustration of the sector’s role in India's socio-economic transformation, driving equity, innovation, and inclusive growth over the next two decades.

India’s fast-growing economy has laid a strong foundation for the steep expansion of commercial, industrial, warehousing, and mass-market residential real estate.

The residential real estate market is projected to rise from USD 399 billion in 2025 to USD 639 billion by 2030, reflecting a CAGR of 9.9%.

Similarly, the retail real estate market is expected to expand from USD 1.1 trillion in 2024 to USD 1.9 trillion by 2030 at a CAGR of 10%.

Meanwhile, India’s Grade-A commercial office stock is set to grow from 635 million sq ft in 2020 to 877 million sq ft by the end of 2025, registering a CAGR of 6.7%. Industrial & manufacturing stock in India is expected to grow by a CAGR of 16%-17% between 2020-2030.

Complementing these findings, Savills India’s recent Q2 2025 Investment Market Watch highlights increasing private equity inflows and expanding investor interest in emerging asset classes such as data centers and co-living spaces.

This reflects the evolving complexity and dynamism of India’s real estate ecosystem beyond traditional residential and commercial segments.

Together, these insights firmly position real estate as a cornerstone of India’s socio-economic transformation, driving sustainable development, urbanization, and investment opportunity over the coming decades.

Q) Indian REITs offer distribution yields of 6–7%, higher than the US or Singapore. What makes Indian REITs attractive for both domestic and global investors?
A) Indian REITs currently offer attractive distribution yields of around 6 to 7 per cent, surpassing yields in mature markets such as the US and Singapore.

This yield premium, combined with strong underlying fundamentals, makes Indian REITs highly appealing to both domestic and global investors. India’s higher returns are quite indicative of the promise that the assets hold.

It also needs to be noted that office REITs have a massive opportunity to grow in India. Of the overall high-grade commercial office stock, barely 15-20% has come under REITs so far. That indicates significant opportunity in the coming years.

Private equity investment inflows into the Indian real estate sector in Q2 2025 reached approximately USD 1.6 billion (INR 139 billion), doubling compared to the previous quarter.

Over the first half of 2025, total PE inflows amounted to USD 2.4 billion (INR 203 billion), reflecting a 38% year-on-year increase. These inflows mainly targeted prime office and rapidly expanding data center portfolios.

Our research highlights consistent lease renewals and robust rental growth in these asset classes, supporting stable and predictable distributions for REIT investors.

Additionally, Savills India has observed growing investor interest in diversification into emerging segments such as logistics. These sectors are increasingly integrated into the REIT portfolio structures, broadening income streams and strengthening investment fundamentals.

Beyond yield, the Indian REIT market benefits from an evolving regulatory framework, increasing transparency, and an expanding asset base, particularly in Grade A commercial properties across key metros.

This combination of higher income yields, resilient asset performance, and growing diversification documented makes Indian REITs a compelling choice for a broad array of investors seeking both income and capital growth.

Q) With housing demand resilient post-COVID and interest rates easing, how do you see residential sales trending over the next 12–18 months?
A) The India residential market has demonstrated impressive resilience post-COVID, supported by easing interest rates and sustained buyer demand.

According to the latest Savills India research, particularly our H1 2025 residential market report, premium and mid-segment residential sales are expected to maintain healthy momentum over the next 12 to 18 months.

While affordable housing sales have softened recently due to rising prices and stretched affordability, the segment is now well-positioned for a revival. The interest rate cuts and the GST 2.0 framework are poised to be key catalysts for reviving affordable housing demand.

Lower borrowing costs would directly enhance home-loan affordability, particularly benefiting first-time and end-user buyers who dominate this segment. In parallel, new GST regime is expected to streamline taxation, lower transaction costs, and uplift buyer sentiment, making homeownership more attainable for lower and mid-income households.

With improving income levels and easier access to financing, these policy measures could reignite momentum in the affordable segment, positioning it as a major growth driver alongside mid- and premium housing over the next 12–18 months.

Q) Global Capability Centres (GCCs) continue to expand in India. How critical is this trend for office market demand?
A) Global Capability Centres (GCCs) play a critical role in driving office market demand in India, emerging as a strategic solution to address talent shortages, fuel innovation, and significantly reduce operational costs.

According to NASSCOM, the number of GCCs worldwide continues to rise, with India as the leading destination, hosting over 1,800 centres employing 1.9 million professionals.

India has one of the world's deepest and most appealing pools of talent for GCC, with 3.74 million technology professionals, is almost on an equal footing with China (3.76 million) and way ahead of other top GCC locations like the United States (2.39 million), Brazil (925,000), Poland (785,000), Canada (817,000) and Philippines (216,000).

This sheer size advantage offers multinational companies unparalleled access to a diverse, qualified, and digitally prepared manpower.

For organizations establishing or expanding GCCs, India's depth of talent provides both quantity and depth, enabling high-value functions in domains like digital transformation, analytics, R&D, and AI.

Coupled with competitive prices, a consistent yearly pipeline of STEM graduates. India provides an ideal mix of capacity, capability, and cost-effectiveness to be the most strategic global hub for GCC expansion.

GCC market office expenses (rent, service charges and taxes) average $25 per sq ft – 75% below major global cities' costs. India is the most cost-effective place, with average GCC office expense of $16 per sq ft, 85% below average prime space in London and New York.

Salary advantages are equally significant. Entry-level costs for STEM roles in India average $9,400 per year, while customer support roles cost just $4,000, representing savings of over 70% compared to cities such as New York or London.

This cost advantage, combined with access to a vast skilled workforce, robust digital infrastructure, and government support through SEZs and GCC-friendly policies, has fueled rapid GCC expansion.

Key Indian cities like Bengaluru, which accounts for 38% of GCC office take-up between 2020 and H1 2025- along with Hyderabad, Pune, Chennai, Delhi-NCR, and Mumbai, have collectively seen office absorption by GCCs of 130 million sq ft in the past five years.

The impact is visible in leasing trends as currently GCCs contribute around 45% to annual office leasing in India. In the first half of 2025, GCCs contributed 41% of total office leasing in India, highlighting their critical role in sustaining demand.

Additionally, GCCs are evolving from cost centres to innovation hubs, advancing high-value functions such as R&D, analytics, AI, and supply chain management.

Savills India Research also highlights that sustainability, strategic location selection, and hybrid work models will define the next wave of GCC growth.

Given their scale, innovation potential, and growing footprint, GCCs are fundamental to driving sustained demand in India’s office real estate market, making this trend a vital pillar of its future growth.

Q) Private equity inflows into Indian real estate remain strong—what asset classes are attracting the most global capital today?
A) Private equity inflows into Indian real estate remained robust in H1 2025, reaching USD 2.4 billion, a 38% year-on-year increase. The commercial office asset class continued to dominate, accounting for approximately 31% of total investment volume in Q2 2025.

Land transactions saw a marked surge, representing 40% of PE investments in H1 2025, up significantly from 13% in 2024. Retail and hospitality sectors also garnered growing interest, comprising 15% and 1% of investment shares respectively in Q2.

Mumbai dominated land investments, attracting about 70% of total land transaction volume. Notably, foreign investors contributed 76% of overall private equity inflows, underscoring strong global confidence in India's real estate market.

This diversified interest across asset classes, from offices and land to retail and hospitality, reflects the growing maturity and resilience of the Indian property sector despite global economic headwinds.

Q) What are the key challenges that you face in the real estate industry?
A) While real estate has come a long way over the last decade and a half, from a nearly unregulated and high-risk asset class to a more regulated and managed asset, the industry still faces several challenges today, including rising construction costs, supply chain disruptions, and skilled labor shortages.

While these factors impose constraints, they are encouraging the adoption of innovative building technologies, streamlined project management, and upskilling initiatives that are improving efficiency and sustainability in development.

Additionally, evolving tenant expectations and regulatory requirements around ESG and green building norms are pushing the industry to reimagine office, industrial, and residential spaces. This transformation is fostering healthier, more inclusive, and environmentally responsible developments that appeal to forward-looking investors and occupiers.

With increasing institutional capital inflows and government support, the real estate sector is well-positioned to overcome these challenges and deliver long-term value through sustainable growth and innovation.

In a relatively lesser known manner, it is also affected by the lag in infrastructure and slow-paced urbanization process of the recent past; which somehow hinder real estate from unlocking its real value and high potential. India has begun taking strides in the last couple of decades and is increasingly working to overcome some of these in the years ahead.

Q) Tell us something about the profile—are more Gen Z buying the house or millennials. (ex-Gen Z more into rental flats)
A) While both cohorts are active in the housing market, their approaches are distinct. Gen Z are currently leaning more toward rentals, especially in commercial hubs like the NOIDA Expressway and Bengaluru’s tech corridors, as they prioritize career and location flexibility, focus on startups, travel, and building emergency savings, and prefer compact, tech-enabled living spaces.

While not rushing into ownership, many are exploring innovative models like co-buying as a pathway to future ownership. In contrast, Millennials form the largest aspirational homebuyer segment, driven by a strong desire for ownership yet constrained by price sensitivity and rising housing costs, which often delay their purchases.

When they do buy, they typically seek premium homes, often in peripheral locations or gated communities, though many continue renting while waiting for price corrections.

Overall, Gen Z are renting now with plans to buy later, while Millennials are keen to buy but are timing their entry carefully.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)