Non-Resident Indians (NRIs) and High Net worth Individuals (HNIs) have always considered India as the most preferred destination for investment. This is especially true in the last few decades where there has been a significant growth in number of NRIs all across the globe, they continue to make it big and the lucrative deal of real estate investing attracts them to India. Today’s NRI’s are buying commercial properties for investment. Of course, HNIs also continue to plough huge amounts of money into high-ticket commercial properties in the quest for yield. Private bankers and wealth management firms confirm that their clients have actively started investing in commercial properties.
There are different kinds of commercial properties that are available like retail and office spaces. Investors looking at retail space can now consider affordable options in free-standing high street outlets and shopping malls. Commercial Office segment offers several advantages as compared to residential segment. The rental yield is currently higher at 7-9% p.a. compared to the 2-3% p.a. yield that the residential segment offers.
There is great equilibrium between demand and supply in the commercial segment and rentals are inching up in most leading metros. As the economic recovery gathers momentum, the demand for commercial space will increase further. Another advantage for investing in commercial property for HNIs and NRIs is to run their own venture when they return to India. This segment holds scope for both capital appreciation and regular income through monthly rentals. Investing in commercial space requires much larger investments than residential and this is why commercial real estate is seen as an asset class where only HNIs or NRIs investors can participate. Composed FEMA Policies and associated laws by RBI regarding property purchase by NRI’s have also reinvigorated the interest of NRI’s in investing in the country. This has proved to be a major factor in driving the demand for commercial real estate in the tier 1 and tier 2 cities of India.
Investing in a property in India helps NRIs and HNIs to reap regular rental returns. A large number of young NRI’s are making smart investments by buying properties in India and making money by putting these out on rent. India’s growing working population makes it one of the most favourable countries for real estate investment for rental purposes. There are many locations you can explore for investing in offices, some of them recommended by real estate consultants include Delhi-NCR, Mumbai, Bengaluru, Pune, Hyderabad and Chennai.
It is one of the most important investment destinations in the country, also the biggest in terms of stock availability. Due to the large supply, it also has a high vacancy level. Investing in a pre-leased asset may be the best option, as it will generate revenue from the first day. Investors can also gain from the periodic increase in rentals that can be defined in lease agreements. Sohna Road in Gurgaon and Noida-Greater Noida Expressway have emerged as new office hubs and offer good opportunities.
The country’s financial capital is another big market for office properties. IT/ITeS and BFSI (banking, financial services and insurance) sectors account for more than half the occupied office space. Like in most metro cities people in Mumbai too are moving from central locations to emerging areas for cheaper and better offices. Locations such as Lower Parel and areas as Andheri-Kurla Road and Goregaon have seen a lot of transactions as they offer good connectivity and high quality spaces at much lower prices.
Bengaluru is the country’s IT capital. The city’s office market has so far been driven by demand from IT companies. Though a lot of manufacturing, automobile and biotechnology industries are also present in the city, IT sector is the dominating force and accounts for 57% of the occupied office space. This may be a good time to invest in offices in Bengaluru due to the potential for capital appreciation, provided the investment is made in the right asset. Areas like Indiranagar, Koramangala, Airport Road and Old Madras Road, will continue to be popular with companies looking for prime locations close to residential areas.
Pune is again home to many IT companies. The growing presence of IT companies is fuelling demand for quality offices. This has led to development of new locations in suburbs. Pune is now an important destination on the Indian office market map. Kalyani Nagar, Airport Road, Vishrantwadi, Kharadi, Yerwada and Baner offer a lot of big and quality spaces. These are well-connected with other parts of the city and have the lowest vacancy rates.
Hyderabad has developed as a technology hub. It has witnessed large scale infrastructure development and rapid growth in locations surrounding the Hi-tec City and the township at the core of the state’s IT boom. The city’s business landscape was dominated by engineering and trading companies. SBD office markets of Banjara Hills and Jubilee Hills are preferred markets for investment as they have a lot of mixed-use projects.
The capital city of Tamil Nadu is one of the important destinations for the office segment. Chennai is a hub for automobile, electronics and apparel industries. The city’s industrial growth is aided by two major ports-Chennai Port and Ennore Port which make it easier to export and import goods. In terms of good returns from your investments in office units locations like Anna Salai, RK Salai, Nungambakkam, Greams Road, Egmore and T Nagar, Mt Poonamallee Road, Porur and SBD OMR are fruitful. Chennai is the only city out of the six discussed here, where central business locations are expected to beat secondary locations in terms of investment returns.
As REITs compliant currently, the implementation of RERA act will result in more compliant spaces in near future. With favorable rupee movements against the dollar, Non-resident Indians (NRIs) are returning to the commercial real estate market, to cash in on the opportunities in Delhi-NCR and other markets. Expanding businesses and the emergence of India as an attractive destination, is leading to a growth of interest for both HNIs and NRIs. Increasing purchasing power, combined with government incentives that are looking to attract foreign investors make this the best time to invest in the country’s commercial real estate market.
This guest post has been written by Gunjan Johar, Real Estate Analyst & Home Decor Blogger.