The domestic office leasing space business is still going strong.
Even as a few export-oriented segments of the economy face the heat of the US trade tariffs and many domestic sectors grapple with slowing demand, there are still pockets that are quite resilient. The domestic office leasing space business is still going strong. A recent report from Knight Frank states that the Indian office market has almost touched 1 billion square feet in first half of 2025 and is worth around $187 billion. Led by the demand for global capability centres and other grade A office spaces, the leasing market is quite resilient, especially in the top seven-eight metros/cities.
As a prime player in commercial leasing space, Knowledge Realty Trust (KRT) — with leading developer Sattva and top alternative asset manager Blackstone as sponsors is coming out with a REIT (Real Estate Investment Trust) offer. The REIT offer is open for subscription till August 7. This offer seeks to raise ₹4,800 crore and is entirely a fresh issue with ₹4,640 crore set apart for repayment/prepayment of certain debts in asset SPVs (special purpose vehicles) and the rest to be used for general purposes.
At the upper end of the price band (₹95–100), KRT REIT trades at 0.9 times its March 2025 NAV (net asset value). This multiple is slightly lower than the 0.92 times that the Embassy Office Parks REIT trades at and Mindspace Business Parks REIT’s multiple of 0.96 times, based on their respective March 2025 NAVs. While REITs generally trade close to their NAV, KRT’s slight discount could offer scope for capital gains, especially if leasing and rental growth sustain.
Based on the projections for the net distributable cash flows (NDCF) for FY26 and FY27, the dividend yield (at ₹100) works out to around 6.2 per cent and 7 per cent respectively. Notably, more than 80 per cent of these payouts are tax efficient as they are of the nature of dividends and debt repayments. These yields compare favourably to G-Secs maturing in 2030 (6.05 per cent), 2032 (6.29 per cent) and 2035 (6.39 per cent), though REITs carry market and tenant risks unlike sovereign G-Secs.
A varied client base that comprises top global and local enterprises, high occupancies in its office portfolio, long lease lock-in periods with favourable terms and a strong pipeline of commercial leases with occupants already booked are positives for the REIT.
The prospect of robust dividend yield and the scope for capital appreciation given that the REIT trades below the NAV, make it an attractive prospect for investors.
Investors can subscribe to the REIT from a long-term perspective.
Over the FY23-FY25 period, KRT’s net revenue from operations grew at a CAGR of 16.4 per cent to ₹3,930 crore, while its EBITDA grew at 14.9 per cent over the same period to ₹3,293 crore. These financial parameters make it the largest listed REIT currently.
Premier office player
KRT REIT has most of its office leasing presence in three key metros – Mumbai, Bengaluru and Hyderabad. It has a minor presence in three more cities.
As of March 2025, KRT had total leasable area of 46.3 million square feet, much higher than Mindspace and Brookfield India REITs. The gross asset value (GAV) of ₹61,999 crore is the highest among peers.
It has 29 grade-A office spaces, including 23 business parks/centres and six city-centre offices. Sattva Knowledge City, One World Centre and Cessna Business Park are some well-known office spaces in key metros.
KRT has 450 clients across 20 sectors. Cisco, Google Connect, JP Morgan Services, Star India, PhonePe, Amazon, Novartis and Juniper Networks are some key clients of the KRT REIT.
As of March 2025, about 38 per cent of occupants (by gross rent) are from the technology sector, 23 per cent from banking, financial services & insurance, 7 per cent from engineering and manufacturing, 6 per cent from pharma & healthcare, and 5 per cent from research, consulting and analytics.
The client mix is thus well-diversified and caters to a wide range of industries. Importantly, the fast-growing GCC and multinational customer base accounts for 74.1 per cent of the total gross rentals as of March 2025.
KRT REIT has committed occupancy of 91.4 per cent in its office spaces, which is the highest in the industry. The range for the other listed REITs is 87-91.2 per cent as of March 2025.
When the weighted average lease expiry (WALE) is taken, KRT REIT still scores as the best among competition, at 8.4 years. Embassy REIT has the same WALE, while the figures are lower for Mindspace (7.4 years) and Brookfield India (7 years) REITs.
One key aspect of KRT REIT is that it has been able to generate lease rentals that were 238 basis points higher than the market rent CAGR over FY23-FY25.
With healthy retention rates and 3.2 million square feet of vacant area to lease, KRT appears well-placed on a steady growth trajectory.
Published on August 6, 2025
