Article by Ms. Navya Pahuja, MD & Partner, Shakti Constructions
Investment patterns in India are everchanging and evolving, but currently there is a strong wave that’s only going to encourage our already booming economy. The rise of investment in commercial real estate, and the ease of buying the same has made property owning accessible for investors of all sizes.
Commercial Real estate has proven to be the hero post taking a big hit during covid, especially in Indian cities like Mumbai, Bengaluru and Hyderabad, etc have gained global recognition for their vibrant business environments. International businesses and investors are increasingly looking at these cities for commercial real estate opportunities.
As the economy expands, businesses require office spaces, retail outlets, and industrial facilities etc to support their operations and feed spending to keep the market alive, investors thrive off a growing economy by tapping into the need of the hour, and for commercial Real estate, having so many options to invest in with all fetching a higher ROI and lower maintenance than Residential Real estate.
The Commercial real estate sector in India has not just survived but thrived and grown and is currently on the rise due to several factors, the start of the snowball being;
- Rise of the IT and Business Services Sector: The growth of the Information Technology (IT) and business services sector has been a significant driver of demand for commercial office spaces. Cities like Mumbai, Bengaluru, Hyderabad, and Pune have emerged as major IT hubs, attracting investments in commercial real estate. Another major push to this has been government polices like Maharashtra’s 2015 IT/ITES policy encouraging and enticing developers to make more IT supporting Buildings, creating a win-win situation for developers and IT businesses as well as investors that rent their properties in IT driven areas.
- Urbanization and Population Growth: Urbanization has led to increased demand for commercial spaces in urban areas. As more people move to cities for employment opportunities, the need for office spaces, shopping centres, and other commercial facilities has grown.
- Foreign Direct Investment (FDI): Favourable policies and regulatory reforms have attracted foreign direct investment (FDI) in the Indian real estate sector. Foreign investors are showing increased interest in commercial real estate projects, contributing to the sector’s growth.
- Retail Sector Growth: The growth of the retail sector, driven by changing consumer preferences and increasing disposable incomes, has led to the development of shopping malls, retail centres, and other commercial spaces.
- E-commerce Boom: The rise of e-commerce has fuelled demand for logistics and warehousing spaces. E-commerce companies require strategically located fulfilment centres and distribution hubs, leading to increased demand for commercial real estate.
- Co-Working and Flexible Workspaces: The rise of co-working spaces and flexible workspaces has been a notable trend. Businesses and entrepreneurs increasingly favour flexible office solutions, driving the demand for co-working spaces in major cities.
- Policy Reforms and Regulatory Changes: Regulatory changes, including the implementation of the Real Estate (Regulation and Development) Act (RERA), have brought transparency and accountability to the real estate sector. This has increased investor confidence and positively impacted the growth of commercial real estate.
- Adaptive Reuse and Redevelopment: The concept of adaptive reuse and redevelopment of older commercial properties has gained momentum. Developers are repurposing existing structures to meet modern business needs, contributing to the growth of the commercial real estate market.
As a real estate developer, myself, I saw a change in the way Business owners and investors looked at putting their money down in commercial real estate.
No longer do we think that buying residential properties is going to bring a hefty monthly rental, a big fraction of that residential monthly rental goes into maintaining and running costs of the property. Also because of this, residential real estate for investors is no longer enticing, whereas when buying Commercial real estate even banking institutions sprinkle lower interest rates and loan moratorium periods which makes buyers more inclined than ever.
Overall, the heightened demand for office spaces in commercial hubs, and retail driven areas, often results in increased rental rates. Landlords and property owners now command higher rents due to the premium attached to locations near thriving commercial clusters, and investors are further enticed with ROI growth.
_______________________
