The gross asset value (GAV) of domestic real estate investment trusts (REITs) will increase 35-40% by the end of fiscal 2027, compared with September 2025, driven by asset additions and the listing of a new REIT. Standard annual rental escalations and improving occupancy will also support growth, according to Crisil Ratings.

Sustained growth in rental income, along with diversification and controlled leverage, will keep credit profiles stable.

Our analysis of five listed REITs, with a total leasable area of 152 million square feet (msf) of commercial and retail space as of September 2025, as well as the new REIT likely to be listed in fiscal 2027, indicates as much.

REITs typically expand their asset base either by developing new assets—the share of such assets is restricted to 20% by regulation—or via the inorganic route of acquiring operating assets. The latter approach has been the preferred growth driver for the majority of REITs1 in India.

Says Gautam Shahi, Director, Crisil Ratings, “Under-construction assets currently account for only 5% of the total GAV of REITs. Though this is well below the regulatory limit, REITs are likely to prefer the inorganic route for growth as it helps mitigate risks associated with project implementation and asset ramp-up. More than two-thirds of the 25 msf leasable area addition over the next 12-15 months is likely to be through the inorganic route, while the remaining would be under construction ones slated for commissioning by end of fiscal 2027. This, along with the listing of a new REIT with an estimated area of 15-17 msf, will expand the overall leasable area of REITs by 25-30% to 190-195 msf.”

Asset additions have accompanied strong occupancies. The overall committed occupancy of REITs improved from 88.4% in September 2024 to 91.5% as of September 2025. This is expected to improve further to 92-93% by the end of fiscal 2027, driven by strong demand for office space from global capability centres, the BFSI2 sector and flexible workspace providers. The anticipated increase in occupancy will be supported by the denotification of special economic zones for office space, as well as consumption growth driven by recent tax cuts, easing inflation and lower interest rates, which will benefit demand for retail spaces.

REITs have maintained healthy profit (Ebitda3) margin of about 70% over the past few years. Margin is expected at a similar level this and next fiscal, thereby generating strong cash flows.

Meanwhile, debt of REITs may increase this fiscal and the next, led by funding requirements for asset additions. However, continued equity raising for acquisitions by higher-leveraged REITs, consistent with past trends, will provide an offset.

Says Snehil Shukla, Associate Director, Crisil Ratings, “Overall leverage of REITs is expected to remain under control, supported by an improvement in cash flows, driven by rising occupancy and rentals, and the expected listing of the new REIT at lower leverage. As a result, the loan-to-value (LTV) ratio of REITs is expected to be under control at 26-28% by the end of fiscal 2027, compared with 25% as of September 2025.”

LTV remains a crucial measure as REITs typically tend to refinance their debt, benefitting from the long-term nature of commercial assets. Additionally, most assets under REITs are located favourably, well diversified across locations, tenants and industries, and held by reputable sponsors.

That said, any impact of the evolving geopolitical landscape and global economic slowdown on domestic net leasing and any larger-than-expected debt-funded acquisition by REITs will bear watching.