Indian Wealthy Investors Look at Commercial Real Estate

Commercial real estate is the preferred investment in the current real estate market of India. Wealthy investors are taking interest in office and retail spaces for their real estate investments.

Why are people investing in commercial real estate? In the light of the ongoing Coronavirus crisis, the commercial real estate market has witnesses significant decline in occupancy and rental demand.

 If people are vacating offices and shops, what is the logic behind investing in commercial real estate?

Indian real estate has been in the doldrums for many years now. The residential segment has not given any returns on investment over the last few years. The negative returns on residential investments is true for at least the Delhi-NCR market, which had been the main location for investors.

With people having bad experience with the residential market, they are looking at commercial real estate.

In contrast to residential properties, offices and retail spaces have been performing much better. Prior to the global crisis, the demand for offices in certain pockets had been fairly high. The occupancy levels had been great. Many coworking and flexible office space providers had grown rapidly in the Indian market.

With the past performance, people are considering commercial real estate as an alternative. Houses in India have a poor rental yield of 2-5%. Offices and shops can bring 7-10% annual rental yield. That looks much more promising than investing in homes, which have returned negative yields over the last many years.

Is the Indian real estate market right for investing in commercial real estate? Actually, far from that. However, it is one of the best bets in the current scenario.

Offices have been vacated after the current crisis. However, retail spaces are back in demand as businesses open again. Offices will see a recovery only after things return to more normal. However, investing in offices is also an opportunity as prices have plummeted. With low valuations, the rental yields are much better. Even with poor occupancy, the rental income and expected valuation increase over a long term seem to be attractive.

People are looking to build their commercial real estate portfolio with market prices at a much lower level. It's an investment opportunity that many want to exploit. After all, smart investors buy when people are selling.