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Commercial rental yield in India: A must-know for you

Many of the NRIs are now looking for commercial real estate property investment in India considering the less than expected rental yields from residential properties in India. Currently, commercial real estate property yield in NCR, Mumbai, Bengaluru, Pune, Hyderabad and Chennai are the favourites owing to the availability of Grade-A offices, IT parks, co-working office spaces etc in these cities.

Since the supply is yet to meet demand, these office spaces are assured of tenancy which is attracting the likes of NRIs when they consider commercial vs residential property investment in India.

To reiterate, the co-working spaces are popular among start-ups looking for high-quality spaces at affordable costs. They are looking for affordable spots where opportunities are aplenty.

There is also robust demand from corporate which is :

Why commercial office space vacancy has halved in the past 6 years…??

 

Pre-leasing is also high which is suggestive of occupier’s interest in commercial spaces and the sustained demand. The commercial rental yield in India are firming up faster and also have better Internal Rate of Returns.

Their interest is also piqued by the fact that highest rental yield in India are possible through commercial property investment in India. The commercial rental yield in India plays an important role for NRIs looking to invest in their home country.

In fact, in the past couple or more years, the correction in pricing and muted sales of residential projects has had a negative impact on investors’ attitudes. Rather than investing in residential properties, they are looking towards commercial property investments in India.

However, commercial property investment in India is preferred owing to capital appreciation and healthy leasing.


“The commercial rental yield in NCR is much more attractive compared to residential.”


The diversification of assets by NRIs is also owing to the fact that such commercial property investment in India generates fixed incomes. It matters to NRIs when they consider commercial vs residential property investment in India.

Experts from the industry state that when it is important to consider that returns outperform mutual funds, sensex, traditional Fixed Deposits, with an average rental return of 7-8 per cent and 18-22 per cent of overall returns.

As comparative yield incomes are less in international markets like London and Dubai, NRIs are increasingly looking for commercial real estate property investment in India. While residential real estate continues to face challenges such as lower sales, lower consumer interest and high inventory, annual absorption of office spaces continues to be robust when it boils down to scrutinising commercial vs residential property investment in India.

An increasing number of mid-sized and smaller transactions are happening with the segment clocking 18 million sq ft of absorption in terms of commercial property investment in India in the first half of 2017.

As per industry estimates, the second quarter of 2017 marked a record low for units launched considering that over 20,000 new units across the country had unsold residential units recorded at 4.2 lakh. This meant a fall after 30 months as per experts from the industry.