Unlocking value: CPSE assets to be monetised via REITs

BENGALURU/MUMBAI: The government's move to monetise state-owned real estate through Real Estate Investment Trusts (REITs) is expected to reshape India's asset monetisation landscape, potentially unlocking billions in idle government property while expanding the country's fast-growing yield-oriented investment market.

The initiative may help deepen capital markets, improve public sector balance sheets, and create a new pipeline of income-generating commercial assets for domestic and global investors, experts said.

The shift forms a key highlight of the budget, where finance minister Nirmala Sitharaman proposed setting up dedicated REIT structures to monetise real estate assets owned by Central Public Sector Enterprises (CPSEs).


"India's REIT ecosystem has played a critical role in institutionalising the commercial property sector," said Alok Aggarwal, chairman, Indian REITs Association. "High-quality office portfolios backed by multinational tenants, long-term lease structures and strong occupancy levels have helped deliver consistent distribution growth. The entry of CPSE-backed REITs could further broaden the asset base and enhance market depth, particularly by bringing in unique government-owned commercial and infrastructure-linked properties."

The move reflects a strategic policy transition, from treating land and buildings as static holdings to transforming them into revenue-generating platforms that can attract long-term institutional capital.

"CPSEs spanning railways, ports, oil companies and banks are estimated to hold real estate worth over Rs 10 lakh crore," said Bhavik Vora, partner, Grant Thornton Bharat. "Channelled through REITs, these assets could deliver steady rental income and yield-focused returns, mirroring the success of India's listed REIT ecosystem,"

Channelising such assets through REITs will allow CPSEs to unlock capital, strengthen balance sheets, and recycle funds into core operational and infrastructure expansion activities.

Vora however underlined that profitability post-REIT will hinge on a hard commercial truth-scale and rental quality matter more than portfolio breadth.
The viability of CPSE REITs will depend on asset quality and rental strength and not just size. These portfolios are often fragmented, non-core, and leased at legacy rents, so making them viable REITs would require upgrades, lease resets, and better tenant mix with sustainable payouts ultimately tied to occupancy and tenant quality, experts said.

The proposal also comes at a time when India's REIT market is displaying strong growth and investor acceptance since its inception in 2019.

India currently has five listed REITs managing more than 176 million sq ft of Grade-A office and retail space, with a combined asset under management (AUM) of nearly Rs 2.35 lakh crore. These REITs have attracted a wide investor base including sovereign wealth funds, pension funds, domestic mutual funds, and retail investors, driven by stable rental income and predictable distribution yields.