China, India drive rapid growth in Asia’s REIT market

Investors must navigate risks and adopt long-term strategies.

The introduction of newer products in emerging markets like China and India has driven the growth of Asia’s Real Estate Investment Trusts (REITs), which saw 225 active REITs in 2023 with a combined market valuation of over $340 billion.

According to Catherine Chen, Head of Capital Markets Research for Asia Pacific at Cushman & Wakefield, REITs were listed in the Chinese mainland only three years ago, and in India five years ago. 

“But now the two markets are the fourth and the fifth largest REIT markets in Asia, behind only Japan, Singapore, and Hong Kong,” she said.

"Incredible growth over the last three to five years, and they will continue to grow thanks to improving regulatory environments in both markets, as well as continuous policy support," Chen added.

In more mature markets like Singapore, REITs have also experienced growth, driven by diversification strategies. Singapore's REITs have increasingly invested in overseas assets, particularly in high-growth property sectors such as logistics and data centres. 

However, with growth comes risk. Chen identified both cyclical and structural risks in the current REIT market, similar to those faced by the private real estate sector. "Without surprise, right now, the number one cyclical risk is the elevated interest rate in most markets, which had a significant impact on the secondary market price in general," she said.

The impact of rising interest rates has been particularly pronounced in markets like Singapore, Japan, and Hong Kong, where many REITs are trading below their book value. Despite these challenges, certain sectors, such as logistics, healthcare, data centers, and multifamily properties, have shown resilience. 

"I see an easing in both cyclical and structural risk as interest rates are expected to moderate in most markets in the next six to 12 months, as well as expected recovery in both the office and retail sectors here in Asia," she said.

For investors looking to navigate potential risks, Chen emphasised the importance of understanding the real estate market and adopting a long-term investment strategy. "One should view [REITs] as a mid to long term investment and as part of the buy and hold strategy aiming for long term capital gain while enjoying relatively higher dividend yields during the holding period," she advised.