Anarock Property Consultants are pitching India’s commercial office property as an investment alternative for Non-Resident Indians in a recent report.
“A good commercial property can give an average rental yield of 6-10 per cent and the current rental yield from residential property is a mere 1.5-3.5 per cent.,” said Shajai Jacob, CEO-GCC at Anarock. “The same growth range holds true for capital appreciation.”
He added that the upsurge of India's commercial office market began in 2017 and has been further boosted by the arrival of real estate investment trusts (REITs).
As per ANAROCK data, approximately 11 million square feet of office space was absorbed in Q1 2019, led by Bengaluru and followed by Mumbai, Chennai, and Hyderabad. Supply addition in Q1 2019 rose by nearly 11 per cent on a yearly basis to touch nearly 7.5 million sq. ft. in the first quarter across the top seven cities.
In Delhi-NCR, Gurugram has become a major investment destination for NRIs looking at investing in commercial real estate. However, Jacob pointed out that investment in the commercial real estate sector was a lot more complicated and trickier than the residential segment but also yield a high return.
"Commercial real estate nevertheless requires much larger investments than residential – and finding and retaining suitable tenants for office spaces can also be a lot more complicated than for residential properties. That said, the value proposition of a well-chosen and suitably tenanted commercial property is certainly compelling for NRIs who can afford it," Jacob said.
The biggest benefit for NRIs on investing in the commercial real estate sector is that they can lease their property out for long tenures, and their maintenance remains the responsibility of the tenants, according to the report.
Reshmi Khurana, Managing Director and Head of South East Asia at corporate investigations and risk consulting firm Kroll said that one of the new Indian government’s main priorities was to drive economic growth and the real estate sector was a massive multiplier on the economy to spur Indian entrepreneurs and foreign companies to invest in India.
She also said that the implementation of the Real Estate Registration Act (RERA) would increase investor confidence in the sector over time.
“RERA is very recent; it is a good act in terms of spirit and is starting to have an impact on how the real estate industry works. It’s certainly going to take time for smaller foreign investors to gain the confidence to come back to India. On the other hand, look at Blackstone, Brookfield, GIC; these are all foreign companies who are major real estate investors in India,” Reshmi said.
Office Rental Growth Rate (Last two Years)
| City | Office Rental Growth Rate (per cent) |
| Chennai | 12 |
| Hyderabad | 11 |
| Bengaluru | 10 |
| Pune | 10 |
| Mumbai | 5 |
| Gurugram | 3 |