HNIs are hawk-eyed for the Commercial real estate sector

High Net Worth Individuals or HNIs are buying office space directly from developers as real estate investment trusts (REITs) come into action

With the trend of commercial real estate property purchase going up, India’s wealthy section is switching preference from residential housing. Besides yielding better return on investment (ROI), the sector gets more organized as the real estate investment trusts (REIT), and larger funds increasingly becoming active.

The reason HNIs are gawking at office space is the capital appreciation as well as, rental income that comes along with it. People view purchasing space in large commercial complexes, directly through developers, as a rewarding investment source.

Fund houses are also an investment option for these individuals, they are willing to buy rental assets, and are prospecting REITs, which looks promising in increasing investment security, and increase the returns.

Returns from 8-10 per cent are expected out of the total capital investment on Grade A commercial property. Investors seek properties ranging between 1,300-20,000 sq ft.  Higher purchase proposals are being observed from cities like Indore, Belgaum, and Noida for priced office space in the financial capital, Mumbai, a phenomena unheard of until now,” says Vipul Shah, MD of Mumbai-based Parinee Group.

A big investor market, Delhi-National Capital Region, has experienced around 2 per cent cost appreciation, in the fourth quarter of 2015, along with Bangalore and Chennai.

Bengaluru-based Prestige Estates Projects has also seen more HNI investments in commercial property. To meet the demand, it is launching its large office project with an aim to provide 50 per cent of the ownership to HNIs.

“We have sold 0.5 million sq ft in the last 3 months to HNIs as they are looking to build annuity portfolio as returns are better than residential projects,” said Nanda Kumar OP, Vice President and Head of leasing, at Prestige Constructions. “We will continue to see rental appreciating by around 7% annually.”

“As the office space sector gets more organized, HNI and non-resident Indian (NRI) investors are realizing that instead of taking on the headache of directly buying, managing and maintaining commercial property, they can participate through a REIT with a specialist asset manager,” said Ambar Maheshwari, CEO (private equity), India bulls Asset Management Co. Ltd.

Due to REIT expansion, the industry is expected to rise, following the growing demand for buying rental assets. People are expanding their office assets to generate better returns.

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