Residential property prices are no more soaring. And corporate India's robust growth has brought commercial property in focus. CNBC-TV18 finds out why office space is a better bet.
The savvy property investor is looking beyond homes and land, and is keenly picking up office space. That's because there's more money here, say experts.
Pranay Vakil, Chairman, Knight Frank, India says, "We are looking at a savvy investor who is looking at his returns. He would invest in commercial property in preference to residential property because his returns or yields are far lower in residential at 5.5% compared to commercial whose returns are at 9 to 10.5%"
Samit Chopra, national director, corporate solutions, Jones, Lang La Salle says, "The scene holds true in places like Mumbai where a lot of developers over the last three-four months, looking at the higher demand and short supply situation are very seriously converting their residential plans into commercial to capitalize on the demand situation and upside."
A recent Nasscom-McKinsey survey shows that just IT and outsourcing firms will need 500 million square feet of office space in the next 10 years. And the effect is showing.
In the past year office rentals in New Delhi rose 30% on an average; in Mumbai they are up 50%. And in emerging office destinations, in city suburbs and peripheries, rentals have risen 20%.
The party might have only just begun in the commercial property market. The Nasscom-McKinsey survey says that to meet the office space demand, metros will have to expand through satellite townships at three million square feet, a year. And tier-2 and tier-3 cities will have to develop at least 2 million square feet of commercial space each year.
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