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The return on investment (ROI) on housing assets was quite satisfactory in the past. In some cases, it was even doing amazing good business, depending on the locations, amenities and etc.
In India, historically the rental yields for residential assets have always been low; capital appreciation alone was sufficiently dynamic prospects for most real estate investors.
However, in the last two-three years the hype relating to the residential property investment has faded out with a prolonged slowdown. This has affected the capital appreciation overall.
The continuing sluggishness on the residential property market, coupled with the associated re-investment cycle risks, will also pay a significant role in driving more investments towards various categories of commercial real estate.
In the present scenario, the demand for the office space is growing faster: its demand is higher than the residential space.
Vineet Taing, president of Vatika Business Centre, says: “After RERA and GST came into force, the residential market saw a slow down with limited new launches and tepid sales. However, the commercial realty has remained robust with sustained demand. There is an increasing demand for office space which has led to the growth of business centre, virtual offices, as well as the co-working spaces. In the Delhi/NCR, the New Gurugram region and Dwarka Expressway are set to get a boost both in terms of office spaces as well as retail.”
Developers are with the view that the demand for commercial real estate has increased in the recent time with the sale of its properties like shops, malls and office space has swelled. The reason for this is the higher rental returns.
“The purchasing of commercial properties such as shops, malls, offices and storage facilities, has grown in recent years. The rental returns in commercial real estate is higher than in residential sector especially in a place like NCR, which is inviting more number of investors in this sector. The Indian commercial real estate is also attracting realty players from all over the world. This is increasing the need and competition in this sector; as a result the buyers are getting the best,” said Ravish Kapoor, Director Elan Group.
“Necessity for office spaces is rapidly increasing largely due to massive upsurge of startup landscape, M&A deals, favorability towards manufacturing in India and emergence of our country as a major investment destination. Businesses today are expanding and creating a demand of larger commercial space to accommodate their increasing employee base. Additionally, there is a surge in demand of under construct commercial projects due to higher rental values and scarcity of ready- to- move in office space. Therefore, the sector is witnessing and will continue to see an upswing trend in office spaces.
Investing in a commercial property has always been considered more profitable as commercial investments yield higher rental values than that of residential. Further Reforms like RERA offers broader and safer investment options to small investors ensuring more and more investment swing towards commercial,” said Ashish Arora, Director Distribution, Viridian RED