Commercial Property

According to real estate experts, it’s good times to make an investment in the commercial property as companies are expanding their business with an aim to improve their business sentiment. If you are looking for regular cash flow with higher return and rental, so investment in commercial property is better than residential property.

As per experts, now commercial real estate space is witnessing a revival with little high demand at the time when real estate developers are not building commercial space from last four to five years due to global financial crisis and now its expected that soon existing stock will get consumed. And in simple words we can say that it’s the main reason why real estate developers and commercial property owners are receiving higher rental yields and now people are looking it as good investment option. Indian economy is growing with growth rate of 7.3 percent, apart from that inflation has been reined in with the gradual growth in manufacturing sector. However; with all these kinds of growth commercial office spaces are also gaining momentum because companies are looking for expansion due to improved business sentiments. These days big e-commerce such as; Snapdeal, Amazon and Flipkart are looking for commercial spaces to set up their warehouses, followed by IT-enabled services and the information technology sector as well as financial services and insurance (BFSI) segments and banking sector and they all are resulting in high absorption levels in commercial properties and quality office spaces.

It is expected that in near future the industries such as; engineering, pharmaceuticals and manufacturing will provide further impetus to the real estate market. According to Amit Bhatia of Assets and Business Banking in Deutsche Bank India, “Its best time in India to invest in the commercial properties as it is giving low capital values with high rental yields. However; there are many micro markets where price of commercial properties are still low than the residential property and commercial properties are offering double the rental yields”. The more he added that Grade-A properties including offices, retails or other spaces at high street are also are bound to deliver capital appreciation and higher rentals. However; for commercial properties the capital appreciation is low due to many speculative buying in residential property. On the other hand office spaces are more driven by end users whereas; commercial space might not be as easy to sell as residential spaces are and its also easy to find tenants for offices spaces in comparison of residential.

Why it’s best time to invest in commercial property:

From investment point of view the difference between commercial and residential property is that in commercial real estate you will get more rental in comparison of residential property, but when it comes to sale property, so its pretty easy to sale residential property, but its tuff to sale commercial property, as per the statement of Viral Desai, National Director at Knight Frank India. The more he added that in past few years, residential real estate market has seen more appreciation, but now its on peak and about to get over. However; it is expected that in near future office spaces are continues to give better rental yields. In residential property the annual rental yields are about 2 percent, but when it comes to office space annual rental yields are about 8 to 11 percent. Offices spaces are offering good opportunity for investors as tenants are looking for good quality lock-in of leases spaces.

Income from commercial property:

It is suggested to invest in the property which is on the lease already because it will provide you regular cash flow, as per the statement of Desai. In normal cases, people prefer to go for the rental agreements of two to five years, if the space is for office and during that duration the tenants are locked in for that period. So if you are about to invest Rs 5 to 6 crore in an office space, so you can expect to get Rs 50 to 60 lakh as annual rental income. Apart from that you should also check that which kind of company has leased out the property and for what kind of business, for example if banks or some other brands has leased out that property, so you can expect that they will continue for next 15 to 20 years at least because they will avoid to change their address. If you are planning to buy property no multiple owners and large part of property is with real estate developers, so property maintenance will not be big challenge. As per the statement of Sanjay Dutt, Managing Director of Cushman & Wakefield, “The top three cities which have saw good supply and demand in the period of January to September 2015 were Pune, Delhi-NCR and Bengaluru. However; till now they have collectively contributed 77 percent to incremental supply and 65 percent to commercial absorption and on the same time you can expect annual rental yields of 11 to 12 percent for Bengaluru, whereas; in Delhi and Pune you can expect annual rental yields of 7 to 9 percent.

Why should you leverage the opportunity?

We all know that unit size of commercial real estate is larger than the residential and due to that investors need to invest much larger amount in commercial property. And apart from that they will get no tax incentive for investing in commercial real estate, as they are used to get for homes. If you are thinking that price of property is too high and you will be not able to manage it, so you can take loan for the property against rental income.

Checklist before buying commercial property:

1. It’s recommended to check the background and experience of real estate developer in commercial property.
2. If there are any existing tenants, so better to consult with them and its suggested to check that what kind of companies have leased out the space and the business the tenants are into

• Check the infrastructure, society, location as well as surrounding area.

1. If you are taking loan or borrowing money, so never keep your property vacant for long periods.
2. If buying resale property, so prefer to buy leased out property.

While tying up with e-tailer Snapdeal last year for the sale of premium houses, Ratan Tata was sure that the investment would be testimony to the growing interest of established business houses in India’s burgeoning internet trade.

The property carnival by Snapdeal in association with its realty partner Tata Housing on June 5, 2015 witnessed the largest deal of Rs 1.1 crore.

Hours after commencing the online sale of Tata Housing’s premium and luxury apartments on its website, e-commerce major Snapdeal announced its biggest transaction worth Rs. 1.1 crore. The property festival has received an overwhelming response with more than 1800 enquiries.

Snapdeal Vice President for Fashion, FMCG and Real Estate, Amit Maheshwari said, “We offer an effective and economical channel for Tata Housing to reach its target group across India”. “Since the launch of the real estate category, we have focused on forging alliances with some of the most trusted names in the industry to provide a range of housing options to customers”, he added.

While Snapdeal has reaped success in online sale of real estate, the Co-founder & Managing Director of realty portal Shopsandhomes.com Rohit Dixit says, “Buying homes online is preferred only by large Investors who believe in a particular brand.  “ . “ The end user who purchases a flat with the motive of occupying it will never choose a property online, be it any trusted e-commerce gateway ”, he adds.

Selling real estate property online

In the era of internet when things are just click away; there are many traditional businesses which are facing tough competitions from those who have strong presence on internet. In present, real estate websites firms are making a daunting leap into e-commerce business. Snapdeal and Housing.com, both are backed by Japan’s Softbank, and now they are building technology and teams to sell real estate properties online to tap India’s billion-dollar real estate market.

To instill customer trust in high-risk environment, the companies are banking on wealth of data, brand recognition and offline partners. It is just because the lack of a focused realty technology product, which is selling real estate online hadn’t picked up. One of the Mumbai based company has sold 115 apartments online for Tata Value Homes and had generated the gross merchandise value of at Rs 50 crore over five days of period. One of the least website also launched a technology known as ‘Slice View’, which allows users to go through each floor of a building project; hovering over a particular flat shows availability and built-up area.

Business plan of Housing.com and Snapdeal to sale apartments online:

For current year, Housing.com already has 500 builder campaigns in the pipeline. According to Advitiya Sharma, who is co-founder of Housing.com, “Selling houses online isn’t an easy problem to solve”. Snapdeal, also have aggressive plan to sell new real estate projects on its website. The marketplace was the first to sell Tata Value Home projects online, in September. According to Amit Maheshwari, Vice-president at Snapdeal, “We are going very deep into the real estate category after capturing major market share in mobile phones to clothes and jewellery market”.

According to some of the experts, selling real estate property online is a different ball game, whereas; real estate transactions should be handled by the growing number of online real estate sites. The nature and function of consumer products and real estate is different and it is not in the match with Snapdeal’s core competence, said Sunil Wattal, who teaches management information systems at Temple University in the US. However; Amit Maheshwari, said that the differentiator for Snapdeal is its scale. “We will bring much more visibility and customer footfall to real estate developers. That translates into economies of scale and we pass over benefits to our customers.”

As per the Co-founder of Helion Venture Partners and a member on Housing.com’s board, Mr. Ashish Gupta, “Housing takes on some of a broker’s or agent’s responsibility, which is good because most people do not trust brokers or agents and technology can help to break these things.” However, not all realty websites are rushing to sell real estate properties online.”We will empower the customers with expert locality insights and exhaustive listings of properties,” said CommonFloor.com co-founder Sumit Jain.

E-commerce companies Flipkart, amazon

As we all know that e-commerce industry is changing the way of traditional shopping and helping the Indian economy to grow. Online shopping has given a fresh lease of  life to hundreds of land owners because leading e-commerce companies are planning to buy the land to build their own warehouses. But earlier it was not possible due to tight FDI policies for multi-brand retail business. Amazon, the American online retail giant has announced the war chest of $2 billion for India when Flipkart raised $1 billion in a fresh round of funding. All the leading e-commerce companies have begun a massive hunt for warehousing facilities in all over the country.

One side Amazon is planning to lease more than million square feet of warehousing space in current year to set-up fulfillment centers and other side Flipkart has recently leased 500,000 square feet of warehousing space across the country and it is expected that these warehouse facilities will commission before November 2015. According to one of property consultant who has knowledge about Flipkart’s plans, “To kill the competition Flipkart wants to gear up its supply chain before Diwali rush, however it is also equivalent of the Christmas sale season in the US when players like Amazon do a big chunk of their business”. All major Indian online retailers have already sounded out property consultants for their plan to lease 2 million sq ft of warehouses before the Diwali of current year. It is expected that these space will be leased by April 2015 and will be ready for operation by July 2015, just before festive season, as per the statement of consultant.

The recent policy on FDI in multi-brand retail didn’t find many takers and eventually it became a non-starter because of stiff local sourcing and upfront investment norms. In December 2014, Amazon had announced that they are going to set-up five more fulfillments in all over India including Delhi, Chennai, Jaipur, Ahmedabad and outskirts of Gurgaon to cover Noida. Currently, they have existing facilities in the outskirts of Mumbai and Bangalore, it has almost doubled its total storage capacity to over half million square feet. According to property experts, Amazon has already leased more than 250,000 sq ft of space in Bhiwandi near Mumbai and 16,000 sq ft of warehousing space in Delhi’s Mohan Cooperative. And now Amazon is looking for more space in other part of country.

Plan of Amazon, Snapdeal and Flipkart for their warehouses:

An official spokeswoman of Amazon said, “According to our company policy, we never comment on what we may or may not do in the future. CBRE which did the Mohan Cooperative deal declined to comment, whereas; JLL, which did the Bhiwandi deal too declined to comment”. But the property consultant quoted before few months that Amazon is looking at warehousing space in Chennai, Hyderabad, Ahmedabad, Jaipur, Ludhiana, and another one in the NCR near Gurgaon.

According to Rohit Bansal, the co-founder and chief operating officer (CEO) of Snapdeal.com, “We are looking at building 500,000 sq ft of warehousing space in the next one year”.

Flipkart is also looking for new space in new cities such as; Ahmedabad, Chennai Hyderabad and Kochi to expand its presence through warehouse facilities. Finding quality warehousing space, however, is a tough task, especially if companies are looking outside of the NCR and Mumbai towards smaller centers.

According to Nirav Kothary, Head in Industrial Services Department at property consultancy JLL, “Real estate developers in Mumbai and NCR have matured enough and are building warehouses with specifications matching international company requirements and now they are ready to catch-up in other cities”. The cities such as; Hyderabad, Jaipur, Lucknow, Bangalore, Chennai and others the bulk of the large deals are for built-to-suit warehouses, stated Anckur Srivasttava, chairman of GenReal Property Advisers who is working with few of the online retailers to lock-in space.

According to the estimate of real estate experts, about 70 per cent of the investment by these ecommerce companies are going to set-up the back-end infrastructure which will include the warehouse and logistics facilities.

3D preview of flats

Now you can have a three dimensional view of your wannabe residential flats as the developers have created a buzz with digital marketing and soft tools to induce the buyers. The developers and builders are using every tool in the kitty right from using drones to film new projects and thus offer a preview of how the flat will look like to the prospective buyer.

Already affected by the sagging sales, the developers have resorted to digital marketing tools to sell at least 2, 00,000 residential units during the October-December period, which translates for about 40 per cent of the annual sales. Industry watchers say developers are hoping to close as many deals by the year end as possible.

A host of builders are using 3D walkthroughs that help prospective buyers to visualise what they are going to buy. Speaking about the new approach, Advitiya Sharma, co-founder of Housing.com told a newspaper, “We have used drones to capture the view of a project from various angles. For a consumer, the Internet is the first point of enquiry and we want the experience to be good.”  This company, which counts Tata Housing and Rustomjee among its clients, says it has about 10,000 projects under its net. Several developers, including Tata Housing, Godrej, Mahindra, Wave and CHD already have a digital presence on Facebook, Twitter, YouTube, and Pinterest. Tata Housing recently partnered with Snapdeal to sell homes online.

It may be noted that the businesses are moving towards new age marketing. Real estate is no exception. Nowadays referrals and word-of-mouth are becoming very critical for brand building and sustaining growth. This explains why social media and online presence have become very pertinent for real estate marketers, as they help them engage with prospective buyers, says A Harikesh, Senior Vice-President, Marketing & Sales, Tata Housing Development Company.

As per the data put out by the ASSOCHAM, its recent study found that realty firms spend about Rs 2,500 crore every year on publicity across different media and digital marketing accounts. Real estate portal CommonFloor.com has launched an augmented reality-based property search app called CommonFloor Real Estate, which also enables GPS-based map search and brings all its services to the mobile phone. If compared with traditional marketing like newspaper advertisements or billboards, digital advertisements are far cheaper and have a longer shelf life. Besides, industry watchers say that the shift to digital media is also helping developers cut costs by 10-15 per cent.

You buy mobiles, cameras, laptops and even groceries online, so why not buy your dream residential flat on the net? If you were waiting for such a thing to happen, your wait is now over.

Online marketplace Snapdeal and Tata Value Homes, a subsidiary of Tata Housing with focus on affordable housing, recently announced partnership to enable users to buy houses online. As part of the partnership, about 1,000 homes across projects in cities such as Mumbai, Pune, Ahmedabad, Bangalore and Chennai will be put up for sale on Snapdeal. These houses are priced between Rs.18 lakh and Rs.70 lakh and range from 1 BHK to 3 BHK.

The idea was inspired by the fact that as per the reports, one in every two online real estate searches is to buy property and there is a $43 billion market opportunity here, said sources. We started selling homes through our own website last year in December and have already sold over 600 units. This partnership will help us take that to the next level,” Tata Housing Development Company Senior Vice President, Marketing and Sales, A. Harikesh, told a press conference to announce the deal here. Additionally, Tata Value Homes will continue to sell through its own portal as well, he added.

When you take possession of the house, customers buying the house through Snapdeal will get Rs.10,000 a month for a year as an assured rent whether they stay on premise or lease it out as part of the deal. “Details about the project and other things are shared on the website. Registered users can book a unit for Rs.30,000 and then our offline team takes over,” he said. However, the booking amount is not refundable in case the customer does not buy the house. E-commerce story is unfolding in a major way in India and it is predicted that more portals will embrace this idea of promoting realty. “We already have close to 50,000 merchants on our board. I think real estate, as a category, will do well on our platform because people trust our brand. We want to offer our customers the best deals,” Snapdeal co-founder and CEO Kunal Bahl said welcoming the home buyers on to his portal. Harikesh said the company also planned to launch new projects in Kolkata and Delhi-NCR before March 2015, which might also get added to the deal.