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Investing in commercial property


Investing in commercial property

Last updated: February 19 2007
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  • Investing in commercial property

    High net worth investors have a good investment avenue in commercial property, especially with the recent boom in property prices. Moreover, with the business mood being buoyant and the stock markets on a roll, commercial property does come out as a good investment alternative.

    India offers a vibrant market and opportunities for real estate investors. Demand for properties in India is skyrocketing and certainly this is the best time to invest. Analysts are predicting phenomenal growth and foreign direct investment (FDI) in the coming times. With better infrastructure and availability of world class facilities, property is sought-after. India is becoming a global investment destination and a good place for investments in retail, residential or commercial space.

    From a real estate investment perspective, it has been observed that Mumbai, Delhi, Chennai, Bangalore, Kolkata, Hyderabad, Ahmedabad, Pune, Gurgaon, Chandigarh, and Jaipur are the most coveted cities and hot spots for commercial property investments. A number of reputed builders have already invested huge amounts of money here, in real estate development.

    Investment options in commercial property include property for office space, retailing, hospitality and a host of other options in all ranges and categories. According to sources, the rental income from investment in commercial property in metros here is 10.5 per cent, which is the highest in the world. In case of investment options like bank deposits and bonds, the returns are in the eight per cent range.

    Increasing demand from IT and BPO sectors has led to a 20-40 per cent rise in capital values for office space in the last 12-15 months across major metros. Grade A office property yields 10 to 14 per cent on an average. Capital appreciation in retail property stands at 20-35 per cent on an average.

    The real estate sector will continue to be one of the fastest growing sectors in the economy and is expected to capture 18 to 20 per cent of the FDI coming to India. In metros, locations where more investment activity is seen are the suburbs where new developments are coming up.

    With high demand for good property and high rentals, the returns are good. Leases are usually for a long term, and renewable with rent escalation clauses. So, high net worth individuals may explore the option of investing in the commercial properties for the long term and high returns.

    The impressive returns both in terms of rental income and capital appreciation make it a sound investment avenue. Further, today, investments in commercial property are more or less semi-liquid, if not totally liquid. Disposing off commercial property in prime locations is no problem at all.
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