Amid weak residential property sales and freezing of funds by NBFCs and banks, developers have found opportunities for strata sales (sales to individuals or individual investors) in property offices as part of commercial developments .
The Property Office is an investment offering to High Net Worth Individuals (HNIs) and prospective businesses to own their office space.
“Developers have resorted to condominium sales in order to maintain their cash flow, many have gradually listed between 25 and 40% of their office supply for condominium sales,” said Anuj Puri, President of ANAROCK Property Consultants.
Activity area .
Early last year, real estate giant Prestige Estates announced plans to resume co-ownership sales of at least 25% of its office assets to individual investors. Brigade Enterprises also began to sue him.
“Property offices have always been attractive to investors because they are annuity income-generating assets that appreciate year on year. The most popular sizes for property range from 2,500 square feet to 10,000 square feet. However, in some cases it can be much higher,” said Nirupa Shankar, Executive Director of Brigade Enterprise.
“SMEs also prefer to buy owned offices for their own use rather than paying rent. To cater to this segment, we have almost 10 lakh square feet of office space, spread over three properties specifically designed for property offices,” she added.
Puri said, “As residential (real estate) has generated almost negligible returns over the past five to six years, many investors are focusing on commercial assets for higher returns. NRIs and HNIs make up the bulk of these investors. So, considering the viability, it becomes a win-win deal for investors and developers.
“For developers, it gives them the cash to grow their business, while for investors, it provides an opportunity to earn high returns. Not only that, it also helps developers get rid of the hassle of property management.
According to Vishal Ahuja, India Head – Private Wealth Group, JLL, “The rental yield of an office asset varies. Basically, it could be 8-8.5%. On the rental side, an asset management fee is charged by the developer, so the net return decreases accordingly.
In terms of yield, ANAROCK’s research indicates that Class A commercial properties generate returns of 7-9%, while non-Class A assets potentially offer 9-10%. Yield dipped slightly for both sets amid the pandemic.
“In fact, India’s stratum sales market is becoming more and more attractive even to small investors. A well-chosen CRE (commercial real estate) play in a Tier II city can start from ₹10 lakh. The upper limit for investing in Class A assets in metros is, of course, somewhere in the stratosphere,” Puri explained.