The Growing Prospects of Commercial Property Investments

With the government boosting commercial and industrial growth in India through the 'Make in India' campaign, prospects of investing in commercial properties have gone up significantly.

Amid the downfall of residential real estate across major Indian cities, increasing number of investors are realising the potential of commercial real estate for seeking high return on investments (ROI). Apart from the known merits of investing in a commercial property, the fact that the government is giving a thrust to industrial and commercial growth in the country is a major reason for the shift in buyer preference. With the 'Make in India' campaign promising a significant rise in development of new office spaces, manufacturing units and warehouses, investing in commercial realty seems to be a wise decision in the current scenario.

Reiterating and supporting the new investment choice of investors, Lalit Kumar Jain, CMD, Kumar Urban Development Ltd (KUL) and former Chairman and President, CREDAI says, "Currently, demand for commercial properties is much higher than it was about three years ago. The rental values of commercial properties have increased two-folds in many cities. With Gross Domestic Product (GDP) going up, investments in commercial properties are bound to give healthy returns in the coming few years. The net absorption of office spaces is only to set to rise on account of the government's 'Make in India' campaign and an overall pick up in the economy."

Increasing demand for commercial properties
As the industry anticipates a rise in absorption of commercial spaces in the country, there has already been an improvement noted in the last few months. According to the latest 'Office Market' report by CBRE, India, there has been a notable rise in the absorption of quality office spaces in major Indian cities in Apr-Jun 2015, as against the preceding quarter. With more than 8 million sq ft office space being absorbed in the top seven cities, the leasing activity recorded a 70 per cent hike (Q-o-Q). While maximum demand and thus absorption for commercial office spaces was noted in Bangalore, a healthy number of transactions were recorded in Delhi NCR, Mumbai and Chennai too.

Another report by Cushman & Wakefield stated a rise in office space absorption by 32 per cent. According to this report, 17.9 million sq ft of office space was sold in the top eight cities between Janurary and June 2015.

Various business-friendly initiatives and tie-ups by state governments have improved the sentiments of commercial space buyers, who are increasingly investing in quality office spaces. Lately, commercial giants such as Google, Amazon, Flipkat, Infosys and TCS invested heavily in offices spaces in various cities. The increasing start-ups culture has also had a major impact on demand for office spaces available for leasing.

Prospects of investing in commercial properties
If we sum up the current real estate scenario, the residential market of most cities is going through a slowdown; and the commercial market is growing on both demand and supply front. In such a situation, investing in commercial properties does hold healthy prospects of ROI. Amit Modi, Director, ABA CORP suggests, "In the ongoing real estate environment, investments in commercial properties are practical, especially for those who have the capacity to pay the down payments. In addition to capital appreciation, buyers can look up to regular cash flows in the form of monthly rentals, which can range between eight and 11 per cent, as against two to four per cent in residential properties."

So if you have enough equity and are looking for a profiting asset, considering a commercial property could be a prudent choice.