KRT

India's commercial office market demonstrated remarkable resilience in FY26, with a projected 90 million square foot absorption in calendar year 2026, expected to reach 100 million square foot by 2028. Global corporations are deepening their presence in India, driven by talent and cost competitiveness, leading to GCC revenues reaching $98 billion in FY26, four years ahead of initial estimates. This robust demand underpins the positive outlook for the real estate sector despite global uncertainties.

KRT reported a strong financial performance for FY26, with revenue growing 16% year-on-year to INR 4,577 crores and Net Operating Income (NOI) increasing 18% year-on-year to INR 4,048 crores. The company distributed INR 2,101.9 crores to its unit holders, surpassing IPO projections. KRT's market capitalization now exceeds INR 52,000 crores, making it India's largest REIT, and it achieved significant global recognition through inclusion in the FTSE All-World and FTSE Nareit Global REITs indices.

KRT's portfolio achieved a 92% occupancy rate, with in-place rents growing 7% and new leasing commanding a 26% spread and a 5% premium to market rents. Management highlighted the portfolio's resilience to AI disruption, attributing it to 45% of gross rentals coming from GCC occupiers, negligible exposure to traditional IT services, and 31% of portfolio value comprising front office assets. The Central Mumbai front office portfolio saw a 10% year-on-year occupancy increase to nearly 90%, with leasing rentals 27% higher.

KRT is actively expanding its portfolio with an existing 1.2 million square foot under-construction pipeline and a new 1.4 million square foot block commenced at Sattva Global City, Bangalore. The company also maintains a healthy ROFO (Right of First Offer) pipeline of approximately 6.7 million square foot. The 1.2 million square foot under-construction portfolio is expected to be onboarded by Q2 FY27, with pre-leasing discussions underway for 250,000 square feet in the Endeavour asset.

For Q4 FY26, KRT's revenue grew 12% year-on-year to INR 1,196.5 crores, and NOI increased 14% year-on-year to INR 1,053.3 crores. The distribution for the quarter stood at INR 1.62 per unit, with 87% being tax-exempt. The company successfully optimized its financing profile by raising INR 4,200 crores at a blended cost of 7.3%, reducing its overall cost of debt from 8.6% to 7.2% during the year through strategic debt replacement and rate renegotiation.

KRT observes strong market momentum, particularly in Mumbai, which is expected to contribute approximately three-fourths of the mark-to-market potential in the next two years due to lower historical rents and shorter leases. While some Bangalore assets experienced occupancy dips due to specific exits (e.g., 400,000-450,000 sq ft in Exora), these are viewed as opportunities for re-leasing at significantly higher market rates (INR 95-100 vs. INR 70-75). KRT's acquisition strategy remains disciplined, focusing on value-accretive opportunities that strategically fit the portfolio, without having made any acquisitions this quarter.

KRT's committed occupancy is 92%, while economic occupancy stands at 86%, a 6-point difference that management expects to narrow to 2-3 points within the next two quarters. The company aims to increase overall portfolio occupancy to 94-95% in the next year. Approximately 1.5 million square feet of leases expire annually, with 44% of the 1.8 million square feet expiring in FY27 already tied up at a 31% spread, indicating strong tenant satisfaction and portfolio quality.