Anecdotal evidence suggests the Indian government's land holdings exceed those of some small nations. While ministries hold most of this land, more than 100 public sector undertakings — many listed on exchanges — also control a large share. In the recent Budget, the Finance Minister proposed “to accelerate recycling of significant real estate assets of CPSEs through the setting up of dedicated REITs”.
If implemented, many Maharatna, Navratna and Miniratna companies could unlock thousands of crore worth of real estate assets. They would follow business groups such as Godrej, Aditya Birla Group, Wadias and Raymond, which have leveraged land banks to enter real estate.
Cash Rich & Asset-Light
Central Public Sector Enterprises may take a different route. “Several CPSEs own large tracts of real estate — both land as well as buildings — which are not completely revenue-generating. However, by putting these assets into REITs, they can be valued and monetised in the market, rather than lying idle. REITs convert these idle land and buildings into income-producing instruments open to investors,” says Shobhit Agarwal, CEO of Anarock Capital.
The government has not yet shared details on the assets or the structure of monetisation. Experts say spinning off real estate could help PSEs turn asset light.
“They can raise the money via a REIT at market value, and convert a commercial property into a rental. The PSE can get the cash and rental would be a percentage of value that they pay. That way, they can monetise an asset while using it as fixed assets are converted to cash which can be deployed or given as dividend,” says Abizer Diwanji, founder of NeoStrat Advisors.
According to Sandip Vimadalal, founder of Vimadalal & Co, the government does not intend to sell properties directly. “They might put these assets into a government trust to manage the same — be it offices or residential — and it might bring in investors. For investors, it would be a safe investment with reasonably good returns. And since these REITs are listed on the stock exchanges, they can enter and exit at any time,” he says.
Agarwal says a trust structure may be the preferred route. “Monetisation will be led by dedicated REITs, pooling significant CPSE real estate into listed trusts, alongside options like long-term leases and, where appropriate, direct sale of non-core parcels,” he says.
REIT-Ready Assets
PSUs hold vacant land and built-up assets. Experts say the first phase may focus on income-bearing or repurposeable buildings and urban campuses, which are ready for inclusion in a REIT — real estate investment trust, a pooled vehicle that owns income-generating property.
Most PSEs own office buildings and residential apartments for employees, along with large land parcels. Energy companies such as ONGC and NTPC also operate townships with schools and hospitals.
Many PSEs own commercial properties, including full buildings, in city centres across metros and smaller towns. REITs could reduce the burden of maintaining these assets. While profitable PSEs maintain properties, others struggle, and some assets remain unused. Professional management could improve returns.
A former PSE director calls it a “criminal waste” of real estate. “There are large buildings which are left empty and there is little money that's coming as it's stuck in bureaucracy,” he says. An entity that manages these assets and secures rent could increase value for public sector companies.
Show Me The Realty
Public sector banks operate branches across the country. Experts decline to estimate the total real estate value held by these entities.
Most Maharatna companies own real estate worth at least a few thousand crore, according to industry estimates. As an indication, BSNL and MTNL monetised real estate and fibre assets worth over Rs 12,000 crore in recent years.
“A large number of MTNL buildings in Mumbai are occupied by the government of Maharashtra, excise department or various other government offices. I am sure there are rental agreements between them. That's how it mostly works. Most government offices tend to rent to each other when there is extra space,” says Vimadalal.
Other government companies lease space to tribunals and courts. Such bilateral arrangements may not maximise returns. Professional managers could improve yields.
“Why must PSEs lock in so much real estate? It's time to rationalise it as to why it should even be there,” says Diwanji.
Times Have Changed
BSNL and MTNL acquired large land parcels when satellite and telecom technology required extensive physical infrastructure. Technology has since evolved, reducing space requirements. Several companies acquired or received land for purposes that no longer exist.
“The Central Telegraph building has a large building in Churchgate in Mumbai and was buzzing when people were sending telexes. They do not anymore. A lot of companies have properties that are not as useful,” says the former director.
He cites an energy sector PSE that once had about 40,000 employees. The workforce has declined to around 25,000 as functions were outsourced. However, its commercial and residential holdings reflect the earlier workforce size.
Public sector banks also hold extensive branch infrastructure, even as banking services have shifted online. Some of this space could form part of a REIT structure.
REITs A Part Of The Plan
The proposal aligns with the government's Asset Monetisation Framework approved in 2019. The framework aimed to monetise land, buildings and brownfield operational assets — infrastructure projects that are operational but require further investment — such as pipelines, roads and mobile towers.
“Many public sector assets are sub-optimally utilised and could be appropriately monetised to create greater financial leverage and value for the companies and of the equity that the government has invested in them,” the government said in a 2024 note.
REITs have gained wider acceptance in recent years. Five listed REIT vehicles manage about Rs 2.3 to Rs 2.35 lakh crore of assets and roughly 180 million square feet of Grade A space, according to Anarock.
“The government is plugging CPSE assets into a functioning framework rather than experimenting with something new,” says Agarwal.
For REITs, the move may expand exposure beyond offices and malls and deepen the asset base. “For investors, CPSE asset-backed REITs might offer a better safety profile with steady returns,” says Vimadalal.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
