RMZ Group

The country’s office space market is experiencing a major boom with commercial real estate transactions of nearly $3 billion recorded during the last calendar year. In a series of high profile office space deals of large global investors like Blackstone, GIC of Singapore, Brookfield Asset Management, Canadian Pension Plan Investment Board and Middle East sovereign funds have chased down transaction opportunities. The latest is Bangaluru based RMZ group which has acquired Essar’s Equinox biz Park in Bandra-Kurla Complex in Mumbai.

India’s large grade-A office buildings, riding on a robust services economy, have returned stable yields to investors in an otherwise volatile real estate market.

In a latest, Southern real estate major RMZ Corp has acquired Equinox Business Park, owned by billionaire brothers Shashi and Ravi Ruia of Essar, in Mumbai for Rs 2400 crore. RMZ, in which Qatar Investment Authority is an investor, is said to have paid Rs 19,000 per sq ft for the deal.

RMZ has a target of acquiring 80 million sq ft of rent-yielding office space in the next five years across India’s top cities. This puts RMZ and Qatar combine in direct race with cross-town rival Embassy Office Parks to emerge as the country’s top office landlord. Private equity giant Blackstone Group owns 50% stake in Embassy Office Parks.

The biggest acquisition in Indian office space market is for Rs. 2,050 crore by Brookfield for the majority control in six parks in Unitech Corporate Parks, NCR and Kolkata.  It also paid an undisclosed amount to buy Unitech’s 40% holdings.

Embassy Office Parks acquired Vrindavan Tech Village in Bangalore for Rs 1,950 crore, which is also counted among the other big deals in the commercial space market.

Namma Bengaluru

Property Consultant JLL India and Royal Institute of Chartered Surveyors (RICS) have forecasted that Indian realty market will see a revival in 2016. Bengaluru, witnessing a real increase in realty, has emerged as the second most preferred destination for investors after Mumbai.

Mainly driven by private equity (PE) players, the demand for real estate is especially coming from the commercial real estate segment. Juggy Marwaha, Managing Director, South, JLL India says, “PE investors are attracted to Bengaluru, as it is a highly corporatised market with good quality tenancies. The IT firms pay decent rents, the lease terms are good and it’s a stabilised market where demand and supply has always been kept neck-to-neck.”

The increase in demand for commercial real estate doesn’t mean that there is a lack of opportunities for retail investors. Affordable commercial units in North Bengaluru can become potential good investments because of the large demand emanating from eCommerce businesses and startups in the area. Endorsing the prospects of North Bengaluru, Satish B.N., Executive Director, South India, Knight Frank India says, “North Bengaluru (Thanisandra and Hebbal) has better prospects than East Bengaluru (Whitefield and Brookfield), owing to better infrastructure and metro connectivity,”.

Over the last three years, the average price growth in Bengaluru’s residential areas, has been approximately around 23%, higher than the average price growth in other important real estate hubs such as Delhi NCR (18%), Mumbai (22%) and Pune (17%). A case for example would be Hebbal, which saw a 67% growth with average property prices rising from Rs 4,250 per sq. ft in 2012 to Rs 7,100 per sq. ft in 2015.

While the growth in residential properties is expected to be subdued in the long run, mid-range residential projects might become a positive exception. The price appreciation in the mid-range segment (Rs 3,500-5,000 per sq. ft) is high because of the demand and availability of customers in the market. Says Marwaha, “Owing to the new set of people joining the city’s IT brigade, the midrange segment is doing better than other project and investors can also looking at renting out the properties after purchase,”. Stating the potential growth of upcoming areas such as Thanisandra and Yelahanka in North Bengaluru, Marwaha added, “You can expect up to 35% price escalation in Thanisandra and up to 30% in Yelahanka, if you buy now and can hold for next 4-5 years. Other areas in the North such as Nagwara, Hoskote, Kanakpura are also good areas to invest in.”