Knowledge Realty Trust Receives Bullish Call From Kotak On Healthy Office Space Demand Tailwinds

Kotak Institutional Equities has initiated coverage on Knowledge Realty Trust, calling it a key play on India's recovering office market and assigning the REIT an 'add' rating with a target price of Rs 132.

KRT is among the country's largest office REITs, with a 46.4 million sq. ft portfolio spread across six cities. This includes 37.1 million sq. ft of completed assets with 92% committed occupancy, 1.2 million sq. ft under construction, and the remaining under future development. Kotak expects the REIT to clock a 14% CAGR in net operating income over FY2025–28E, driven by contractual rent escalation, better occupancy and new project buildouts. The brokerage flagged slower-than-expected occupancy improvement as a key risk.

Kotak estimates gross asset value at Rs 69,500 crore by September 2027, with 91% from office assets and the balance from solar power and maintenance services. Revenue from operations is expected to increase from Rs 3,930 crore in FY2025 to Rs 5,700 crore in FY2028 (13% CAGR).

Growth drivers cited include:

• Rs 580 crore contractual rent escalations

• Leasing 3.2 mn sq. ft of vacant completed space

• Mark-to-market opportunity of 22%

• Leasing 1.2 mn sq. ft of new Bengaluru development

Kotak notes that India's office stock has grown 35x over 25 years, reaching 887 mn sq. ft by March 2025, and is likely to cross 1 bn sq. ft by 2027E. Demand is expected to outpace new supply, tightening vacancy levels further.

Global capability centres, in particular, are expected to remain the primary demand engine for Indian office space.

The brokerage flagged key downside risks:

• Decline in occupancy at leased assets

• Non-renewal or termination of leases

• Tenant concentration risks

• Geographic dependence on select cities

Kotak sees Knowledge Realty Trust as a leveraged bet on India's deepening office demand cycle, supported by GCC expansion, rental escalations and new leasing, but cautions that the recovery is still occupancy-sensitive.

Shares of the company are trading 0.76% higher at Rs 125.27 apiece, as compared to a 0.14% decline in the BSE Sensex.

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