- With high rental yields, pre-leased offices come at a premium as compared to residential assets
- Metro properties more in demand despite high rates
- Most visible ticket size of deals – INR 5 to 50 crore
Better returns, a mature and transparent market are some of the factors that have made investors flock to the country’s commercial real estate. With commercial segment remaining the most favoured among all kinds of asset classes, high-net-worth investors and the uber-rich are now looking at pre-leased assets, primarily office assets, with hope.
As a result, the biggest incentive for investors is the rental yield that is much more than that available through traditional investment option – the residential segment. While the yield for Grade A commercial properties ranges from 7.5 to 8.5%, it is 2-3% in the residential segment. And investors start getting returns on their investments immediately and don’t have to scout for a tenant.
A reform-driven professional market
Growth of India’s commercial real estate segment is in a way a barometer to the country’s economic growth. The segment, in particular, has become increasingly lucrative for investors on account of the newly achieved professional standards in recent times. Regulation on Real Estate Investment Trust (REIT), entry of several foreign investors and strict disclosure norms under the real estate regulation (RERA) machinery are some of the indicators of this success.
Country’s regulatory scenario relating to REIT has also come a long way and is now a piece of established machinery for investors. At the beginning of the year, India witnessed its first REIT listing by Blackstone-Embassy JV. The JV between Embassy Office Parks REIT includes Blackstone’s assets as well as those in partnership with Embassy Group, comprising 33 million sq. ft. across Mumbai, Pune, Bengaluru and Noida. 24 million sq. ft of the portfolio is completed and 95% leased. This includes 11 assets—seven office parks and four buildings.
Other than commercial, interest levels are picking up for high street retail and logistics and warehousing industry.
Who & how?
A closer look at the nature of these deals reveals that the range and profile of these investors vary. Increasingly, family offices are focusing on real estate asset segments, especially pre-leased assets. The market continues to witness active demand from HNI’s and CXO’s of corporates etc. However, this is early in the curve, but we anticipate greater participation from Family Offices for real estate investment opportunities.
Most investors look at a deal in the ticket size of Rs 5 to 50 crore. < i>Country’s top six cities including Mumbai, Pune, Bengaluru, NCR, Hyderabad and Chennai followed by tier 2 cities are on their radar.
Despite premium pricing, properties in metros are more in demand than their counterparts in smaller cities. The key reason is that metros have a mature market – hence, it is easy to get tenants and it is easier to liquidate in comparison to that in a smaller, tier 2 market.
What is ahead of us?
It is expected that investors will continue to invest in these segment irrespective of the challenges the segment faces on various fronts. Further clarity is a key aspect that investors demand. The demand is likely to grow in coming years. With the absorption levels at an all-time high and vacancy levels for Grade A assets being in sub-10% zone, properties in most of the micro-markets will continue to witness healthy demand — both from tenants and investors.
The office market is already headed for tremendous growth. The year 2019 is expected to set new benchmarks in terms of new completions, the latter expected to touch 47 mn sq ft levels. Quality supply will continue to draw in occupiers, willing to pre-commit.
Danube Properties’ Dh525 million Opalz sold out on the first day of launch
October 4, 2022: Danube Properties, the UAE-based affordable housing developer, said, its latest project Opalz, a twin-tower residential project with...
Pacific Mall D21’s ‘Dussehra Celebrations’ drops the curtain with high attendance
New Delhi: Pacific Mall D21 organised a two-day Dussehra celebration and Garba Night, attracting massive turnouts. The special arrangement of...
Tata Value Homes sells over 100 residential units at New Haven, Bahadurgarh at launch
Delhi/Haryana October 4, 2022: With an aim to address the growing demand for quality homes in Haryana – Bahadurgarh, Tata...
Welspun Corp opens steel plant in Anjar
October 3, 2022, Anjar, Gujarat: Welspun Metallics Limited, a subsidiary of Welspun Corp Limited (WCL), the flagship company of the Welspun...
Over 1500 cyclists join Hiranandani Thane Cyclothon 2022 to support ‘Rhyme for Earth’ initiative
October 2, Thane: The Hiranandani Group hosted the first Hiranandani Thane Cyclothon today from its thriving Thane township, Hiranandani Estate. Over...
Ashiana Housing adds over 900 senior living units with Villas and Apartments with the launch of Ashiana Advik in Bhiwadi
New Delhi, October 3, 2022: New Delhi-based real estate developer Ashiana Housing has announced the launch of Ashiana Advik in Sector 39, Bhiwadi....
Developers Speak3 weeks ago
Festive season to spurt bookings: Experts
Developers Speak3 weeks ago
Chandni Chowk at the Centrepiece in tune with the wave of Commercialisation
Report4 weeks ago
Private equity inflow in PropTech firms up 5% to $270 mn in H1 2022: Housing.com
News4 weeks ago
BHIVE receives Rs 240 cr commitments for its ₹ 400 cr Real Estate Fund
New Launches4 weeks ago
Makemyhouse.com expands in India, introduces partner program in 60 cities
Developers Speak4 weeks ago
With Flight Testing in MOPA Airport, spotlight turns to North Goa
Report3 weeks ago
Shop-cum-Office segment grows 30-40% in the past 12 months: 360 Realtors’ study
Report3 weeks ago
Coworking share in office real estate up at 20% in H1 2022 from 6% in 2021: Report