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Investors Looking to Have a Slice of Indian Commercial Real Estate
Updated : March 23, 2020
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Investors Looking to Have a Slice of Indian Commercial Real Estate
Although real estate has been facing a tough time for the past few years, the commercial segment has been gaining traction as an investment option.
Commercial realty attracted the maximum private equity investments approximately to the tune of $3 billion in the first three quarters of 2019. Nearly 7 million square feet of retail space is expected to enter the market in 2020, which would contribute immensely to the overall growth of real estate in the country.
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Not just PE firms but even NRIs have been eyeing the segment for the past some time as it offers better return and yield as compared to residential sector.
To give further impetus to the segment, India’s first REIT ticking in, it can safely be said that commercial realty will grow as a preferred choice for investment. The developers and builders have also got a whiff of the trend and are looking forward to infusion of further liquidity in the sector to come up with more projects.
Commercial sector includes industrial, retail and frontier segments such as co-living. Office space leasing is poised to expand to about 100 million square feet in 2020 across major cities. Not just that, the commercial office stock is likely to cross 600 million sq ft by end of 2020. Co-working spaces in major cities has already witnessed a sharp spike as it reached around 3.44 million sq ft from 1.11 million sq ft in 2017.
The residential real estate sector is right now an end-user’s market. With the boom in entrepreneurship and co-working spaces, individual investors as well as institutional funds are eying the potential of commercial realty. Commercial properties give an average rental yield of 8-10%, whereas rental yield from residential property is somewhere between 1 – 3%. The same holds true for capital appreciation in the current market scenario.
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