Introduction
As the Indian economy thrives despite rising urbanisation and technological breakthroughs, investment in commercial real estate presents a compelling opportunity for both domestic and international investors. Commercial real estate in India is emerging as a strategic and lucrative choice for long-term financial growth and stability, thanks to a rising industry powered by government backing, environmental initiatives, and new proptech solutions.
Rise Of Commercial Real Estate In India
In the bustling heart of India’s economic landscape, the once-muted pulse of the real estate sector has quickened, echoing the lively rhythm of burgeoning infrastructure and a clamour for new spaces. As the sun of a hopeful economic future rises, casting an optimistic light, investors and consumers alike are drawn to the market’s increasing potential.
Commercial Real Estate – A Thriving Investment Option
The commercial real estate sector in India is attractive due to its high ROI and possibility for additional revenue generation. The price appreciation of commercial properties has also shown a positive trend. With increased economic activity and workers returning to the office, commercial leasing demand quickly grows. As a result, investors around India are increasingly investing in Grade-A commercial property in premium locales to get a higher return.
DID YOU KNOW?
- According to a property consulting organisation, commercial lease volume activity reached a seven-quarter high in Q3 2022.
- During the third quarter of 2022, the commercial office sector rose by 29 per cent year on year, with transaction volumes of 16.1 million square feet (mn sq ft) across the top eight cities in India.
- The co-working sector’s percentage of total transactions climbed to 23% in Q3 2022 from 6% in Q3 2021, the highest rise across all sectors. During the period, the industry continued to favour occupiers, with volumes transacted increasing by 380 per cent year on year.
- Pre-pandemic quarterly transaction volumes were surpassed by 6% and are now expanding at a rate of 29% year over year.
Accessibility & REIT Regulations
As per the Economic Times, historically, institutional investors dominated the commercial real estate investment environment in India. However, as Moktan points out, the sector witnessed a dramatic transition with the establishment of REIT (Real Estate Investment Trust) legislation in 2014-15, allowing smaller and less sophisticated investors to join more easily.
Following the debut of the first REIT listing in 2018, the pathway for investors to hold stakes in commercial real estate through the REIT route was established.
Notably, Property Share has been committed to democratising commercial real estate investment since its launch in 2015, utilising the growing frequency of online transactions and the broad use of smartphones.
Their online platform facilitates comprehensive property insights and institutional-level analysis, catering to a discerning investor base.
Current State & Future Demand – 2023
The significant growth potential of India will result in considerable demand for office and commercial space in Tier 1 and Tier 2 cities. It is manifesting itself in the rapid business growth in Chennai, Pune, Hyderabad, and other cities.
The co-working market in India is predicted to exceed 50 million square feet by the end of 2023, representing a 15% increase year on year. In 2023, managed office spaces will continue to grow at a 10% annual rate.
According to a recent JLL analysis, the net absorption of office space in the top seven cities (Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Chennai, Kolkata, and Pune) in 2022 has been estimated to reach $4 billion.
Advantages of Investing in Indian Commercial Real Estate
- High Return Potential: Due to the rapid expansion of companies, increasing need for office space, and a burgeoning retail sector, the Indian commercial real estate market offers promising returns, making it an appealing investment option for domestic and international investors.
- Economic Growth and Rapid Urbanisation: Due to India’s solid economic growth and rapid urbanisation, there is an increasing need for commercial spaces, particularly in tier 1 and tier 2 cities. This tendency translates into increased rental returns and capital appreciation for investors, allowing them to capitalise on the country’s growing business environment.
- Government Support and Policies: The Indian government has been aggressively pushing investments in the real estate sector through various policies and initiatives, such as the formation of Real Estate Investment Trusts (REITs) and reduced FDI restrictions, fostering a favourable environment for investment.
- Portfolio Diversification: Investing in Indian commercial real estate allows for portfolio diversification, lowering total investment risk by introducing an asset class with a low correlation to standard investment vehicles. This capacity for diversification adds stability and durability to an investment portfolio, particularly during market changes.
Emerging Trends Shaping The Future
- Technological Advancements (Proptech): The use of proptech in Indian commercial real estate, such as AI-powered analytics and virtual property tours, improves operational efficiency and decision-making, resulting in a more transparent and expedited property transaction process.
- Sustainability and Green Practices: In Indian commercial real estate, embracing sustainable initiatives such as energy-efficient designs and green building certifications not only reduces operational costs but also aligns with global environmental standards, attracting eco-conscious tenants and investors.
- E-commerce and Logistics Demand: The surge in e-commerce activities has bolstered demand for warehousing and logistics spaces in India’s commercial real estate sector, leading to the development of strategically located industrial parks and fulfilment centres to accommodate the growing online retail market.
- Flexible Office Space Solutions: The growing trend of flexible work arrangements in India has resulted in the creation of adaptable office spaces that provide co-working possibilities and variable lease periods, catering to the changing demands of enterprises and creating a dynamic and creative work environment.
Invest in Market of India: A Smart Choice for the Future
Venturing into Commercial Real Estate in India proves to be a strategic move for future success. With its prime location in an integrated township, our marketplace offers advanced connectivity and cutting-edge resources, providing an ideal setting for your commercial endeavours. Discover our range of ancillary services, 5000+ shops, loading and unloading services, intricately designed to complement and enhance your commercial achievements seamlessly.
Wrapping Up
As India’s commercial real estate sector continues to exhibit promising growth and resilience, investing in this dynamic market presents a lucrative opportunity for long-term financial gains. With the country’s vibrant business sector and rising economy, commercial real estate is a sensible and strategic choice for investors looking to diversify their portfolios and secure reliable profits in the future.
FAQs
1. What are the most important criteria to consider while investing in commercial real estate in India?
Consider location, market demand, regulatory compliance, and the possibility of rental revenue and capital appreciation.
2. How can foreign investors participate in the Indian commercial real estate market?
Foreign investors can participate through direct investments, joint ventures, or Real Estate Investment Trusts (REITs) that adhere to the Reserve Bank of India’s and the Foreign Exchange Management Act’s standards.
3. What are the potential risks of investing in commercial real estate, and how can they be effectively mitigated?
Market volatility, regulatory changes, and liquidity issues are all risks. Reduce exposure to these risks by completing rigorous due research, diversifying your investments, and remaining current on market trends and regulatory developments.
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