Great things are always accomplished by those who yield to trends.
India earned USD 22 billion of the FDI incursions in the first half of 2018, according to the UN Conference on Trade and Development (UNCTAD). This is an abrupt fall due to the implementation of demonetization and the Goods and Services Tax (GST) in 2016 and 2017 respectively. Despite this fall in property rates, rental rates have been constant in India, thereby beckoning the investors to buy commercial properties at an economic rate and enjoying the high rental yields later.
Investors use rates and trends analytics as a tool in making property decisions. For them, investing in commercial real estate serves a good hedge against the volatility of the stock market. At present, the real estate industry is driven by the new trend of leasing out properties. Investors can make money via appreciation when they sell, but most returns are generated through rents collected from tenants.
The rental trend among Investors in India
Commercial real estate in India is booming with Merger & Acquisition deals, corporate funding and office spaces. Buying a good commercial space in a developing region and leasing it to a better brand is considered as a wise investment in India. An approximate 3-5% of rental yield per annum adds considerable value to the overall Return on Investment (ROI) of the owner. India’s Smart City project has been developing 100 cities with progressive infrastructure and better job opportunities that appeal to foreign investors to invest in the commercial real estate market. Corporate office spaces are more competitively priced than residential real estate and are regarded as a safe and growth-oriented investment.
Standardized rental yields of the owner
Rental plans of commercial real estate are feasible in long-term and short-term durations for the tenants to choose what suits their budget. A single-net lease makes the tenant liable to pay property taxes, whereas a double-net lease tenant must pay property taxes and. The tenant with a triple-net lease is bound to pay property taxes, insurance and maintenance. Although the commercial properties are expensive, they have longer lease periods and high rental value. The commercial property investments anyhow bring in 6%-10% rental yield depending upon the quality and location of the property. All these factors contribute to rental trends in India.
Foreign investors in Indian real estate
The Real Estate Investment Trust (REIT) deals with corporate and office sectors by listing properties in the International market that provides regular dividends at low risk. This attracts a greater number of foreign investors to invest in Indian commercial properties. India has attracted 7 transactions worth a foreign investment of $766 million in the year 2018. Foreign investment hikes global capital flow into the Indian real estate industry thereby generating steady and lucrative rental income.
“Buy on the fringe and wait. Buy land near a growing city! Buy real estate when other people want to sell. Hold what you buy!” says John Jacob Astor.
The burgeoning rental market is now giving rise to more rental management companies (RNCs) in India than ever before. Brokers are undoubtedly the bridge between owners and tenants to help with property dilemmas. To survive in the evolving world, one should be vigilant about property trends in their surroundings, as the IT, ITES and the BPO sector has been the leading driver in the commercial rental space for Call centers/BPO offices. In India, major cities like Bengaluru, Pune and Hyderabad compete to offer rental real estate, quality assets and large floor plates. Durable rentals, immense consumption and limited supply have successfully boosted the real estate market in India.
