Commercial real estate: A possible resurgence

“We’ve reached a point where we believe that this is the right time to get into commercial property transactions,” says Jayesh Dattani, who manages the real estate investment desk at the family office of Narotam Sekhsaria, the erstwhile promoter of Ambuja Cement. His argument is simple: Unlike residential projects, commercial property offers investors the opportunity to make a respectable nine percent-plus rental yield. Add to that the scope of a decent price appreciation in select upcoming pockets in metropolitan cities across India, and investors find that risk/reward, at this juncture, favours the commercial real estate market. “The family office is actively looking at opportunities in pre-lease commercial space,” says Dattani.

While residential real estate faces a sustained and prolonged demand slump, commercial properties offer a glimmer of hope. The demand is coming from two sources: Patient high net worth investors (HNIs) and realty funds that hitherto had chosen to deal with only residential properties. 

A significant example of this is global private equity firm Blackstone Group, which has over the last decade invested $3 billion into commercial real estate in India. Its marquee properties include Express Towers at Nariman Point in Mumbai. It also invested in a clutch of office space in Bangalore, which it owns in partnership with property development company Embassy Group. Other investors, who, for the most part, took their eyes off commercial assets in the last decade, are now starting to show interest too. A case in point is the Canada Pension Plan Investment Board, which recently tied up with the Shapoorji Pallonji Group to jointly purchase commercial assets in India. 

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