Rising Investor Interest cause Office and Retail Asset Prices to Rise

By : 360 Realtors

04 May, 2018

 The prices of office and commercial spaces in the country are on the rise. Over the past months, a rising interest among the investors has been evident, which has triggered a rise in the prices of these spaces. The valuations of office spaces and commercial zones are on the rise. This is evident, particularly in the big cities of the country.

Private equity investments are pouring into the Indian real estate, and during the last two years, it has attracted investments worth $15.9 billion. The capitalization rate is decreasing and the liquidity factor comes to play in this case. The real estate market in India is in a nascent stage. The liquidity premium associated with REITs is not present at the moment. As the REITs start getting listed, the capitalization rates will be pulled further by the liquidity premium. This will work in favour of the investors, who have already having their positions in place.

 The business environment in real estate in India is under transformation and various reforms have been incorporated by the government. The volume of investment from the domestic and foreign sectors is increasing over the months. Evidently, the sector is getting more funding and this is likely to result in the growth of the industry. The giant investors across the globe, including the Canada Pension Plan Investment Board (CPPIB), Brookfield Asset Management, Blackstone Group, Goldman Sachs and Qatar Investment Authority are interested in Indian real estate. Over the last few years, these groups have been aggressively inclined in the real estate in the country.

Apart from this, the recent reforms in the real estate sector are attracting more investors. In 2016 and 2017, a number of reforms have taken place in the sector. These include the demonetization, the inception of the RERA and the imposition of GST in the real estate sector. These policies have increased the transparency in the reality sector in India. Besides, the government is taking measures to make houses affordable to the middle and lower-middle income groups. The REITs are also likely to come into the scene in the coming years. The government has also arranged for low-interest loans for the homebuyers. They can now seek these home loans and buy the properties. However, the scene in the commercial real estate sector in the country is different. The property owners are looking forward to buy high-end offices and commercial spaces for better returns in the coming months. The returns on selling these properties are high. The investors also rent these properties off for a fixed return on monthly basis.

 The high demand for commercial property in India has led to a rise in these prices. The blue-chip companies and MNCs in the big cities are looking for high-end office spaces. This trend is likely to continue in the coming months and the commercial property prices are further expected to escalate. You can have a look at the commercial spaces in the key cities, being developed by the reputed real estate companies. The high demand of these properties, and correspondingly higher prices, are likely to give a boost to the industry.