“We’ve attained a position where we consider that this is the exact time to enter commercial property business,” started by Jayesh Dattani, who handles the realty investment desk at the family organization of Narotam Sekhsaria, the former promoter of Ambuja Cement. This statement is straightforward: different from residential projects, commercial property presents financiers a chance to gain a respectable nine percent-plus leasing earning. The possibility of excellent price appreciation in imminent pocket of metropolitan cities, and investors get excellent reward with little risk, support the Commercial Development. “We are looking for the opportunities in pre-lease commercial space” added by Dattani.
At the same time as residential projects faces a continuous fall in the demand, commercial projects present a shine of hope. There are two sources responsible for the demand: Investors with deep pockets and capital that is up till now utilizing for residential projects.
By investing 3 billion Dollars into commercial development in India within last one decade, Blackstone Group is a big trendsetter in this field. Express Towers in Mumbai at Nariman Point is one of the best properties of Blackstone Group. With partnership of Embassy Group, Blackstone also invested in few office spaces in Bangalore. Many other group, who, primarily ignored the commercial developments from the last 5 – 10 years, are now thinking about to launch some projects in this field. For example Shapoorji Pallonji Group & Canada Pension Plan Investment Board is recently joined hand to acquire commercial market in India.
Real Estate Broker Firms are already receiving good numbers of enquiries for commercial property. As stated by source of a real estate consultancy firm “We have so many investors who are eager to buy commercial units”. He also added “this wave of commercial real estate investors has come after a long pause of 5 – 6 years, one that saw both dull leasing (because of an oversupply in office space) and straight capital values (as well the effect of oversupply). But this time both rental and capital values are expecting to rise, and this motivates the Real Estate Investors to invest in commercial projects.
To know more about facts behind the rise of commercial developments, one needs to return to the period between 2003 and 2008. Realty Sector on that time across India was on steroids, and Real Estate Developers saw their capital values appreciate. In 2008, the fall down of Lehman Brothers rooted a financial crisis, and value of residential & commercial properties face down. But value of residential properties started rising very early around 2009, but commercial real estate fared a lot bad. Many regions in India value of commercial property have only now reached to the level of year 2008. If we compare recent residential value with 2008, then we find out double and trebled value now, get a rental income between 1 to 3 percent. Commercial investment return anywhere between 8 and 10 percent.
Only worry for real estate value is the shortage of good quality of commercial development or Grade A office Space according to the industry. DLF Group a real estate giant in India, has a wide range of leased assets, have mad it clear that they are not for investment. As cleared by a real estate portfolio manager “later than first 15 – 20 commercial developments in any city, there is a quick fall in class and this is something capable investors are not ready to suffer”. Accordingly, when any good quality product comes up for sale, there are frequently a dozen investors fighting for it.
High Net Income Individuals can afford to drop the quality chain and purchase either floors or office zones in commercial projects. But Real Estate Investors generally desire to buy such projects in regions that are expected to appear as commercial hubs in 5-6 years. For example, in areas like Thane, Goregaon and Bandra-Kurla in Mumbai are main regions for the investors. In Bandra Kurla Complex, Complex Capitol, a top development, was sold to investors on a step by step basis. Real estate brokers have seen excellent demand in this development.
Managing director of Godrej Properties, Pirojsha Godrej says the total balance fill on his account is because of their completed and new commercial development. Investors yet, are pleased with this excellent existing state: All signals point to commercial properties being a excellent bet than residential developments.
