Commercial Properties give better Rental Yield than Capital Appreciation
For property investors, the options are drying up of secured and safe investments. The concerns on the under construction delivery timelines eat up the investors ROI. We have witnessed a lot of investors staying put and enjoying the regular lease rental income in the commercial spaces and they are quite content over their returns which for them since they invested in 2009-12, have been more than 12%. With the current commercial property prices, one can yield an average of 6-8% vs a residential yield at 2-3%. The capital appreciation in the commercial property investment may be lower, but consistent rental yields with even a slight appreciation make up for the loss. Going forward commercial properties will be at par in demand with the residential properties.
A few points on the Mumbai Commercial Property Market.
1. The prices from Nariman Point to Santacruz for lease rental values are near same which is a range of Rs.125/- PSF to Rs.275/- on an average. The Rs.275/- are for A grade offices in Maker Maxity, BKC. However in One BKC, one can achieve an average lease rental value of Rs.210/- onwards.
2. Inventory is available across the Mumbai City and in fact there will be the addition of more space in the next 6 – 12 months. The transactions reported in Q2 in Mumbai have been slower than in Q1.
3. There are only a handful of good A Grade commercial spaces under construction in the city today.The Impetus is building towards cheaper lease rental values.
4. While absorption ratio has been the highest in the past 2 years, the same is attributed to the supply being constrained as well.
6. A high level of inventory has come up in Mindspace, Malad West as a lot of options are available in other locations for BPO, KPO and other IT related activities.
7. Lotus Corporate Park, Goregaon East has seen some good traction at an average rate of Rs.80/- PSF with good corporates.
The yield on Commercial Properties have been seen consistently in the range of 6 to 8% and demand for properties which are preleased is very good.
Preleased properties give you more advantage as you can always get your lease rent discounted with a Bank and get money in advance for 3 to 5 years perhaps to fund the next properties.
If you are looking to invest in Commercial properties in Mumbai, Thane or Navi Mumbai or looking at preleased assets then please feel free to call us.
Sandeep Sadh – firstname.lastname@example.org