Bengaluru is one
of the best places in India for real estate investments. Many investors ask us:
which asset class to invest in? Where in Bengaluru? Answers to these questions
has many layers, what is the objective of investment, size of investment, risk
appetite and post investment management capability. In this article, we will
share different types of real estate for you to get stated in commercial real
estate investing and land investing in Bengaluru.
We all invest in
real estate for reasons – regular income, appreciation, can be leveraged, tax
efficient, and others. Considering different aspects of the investments, we
recommend two types of real estate commercial investment to HNIs/ NRIs: rental
income properties and land (plotted development, converted land parcels and
witnessed growth across all direction since last 25 years. IT locations are
mostly concentrated in eastern direction of the city and since commencement of Bengaluru
international airport located in north of Bengaluru, Bengaluru North region is
also growing at brisk rate. Therefore, the most preferred locations in Bengaluru
for investment is in east and north of the city.
Available Commercial Real Estate Investing and Land Investing Options in
Now let’s investigate
type of different investment options available in various geographies and
Commercial Real Estate Investing (Rental Yielding Assets)
Based on ticket
size, one can chose the type of investment in this category. For example, if
someone wants to invest around INR 3 CR and above, they can buy a UDS
(undivided share) in a Grade A facility. However, few developers only offer
commercial real estate investing through this route. The investors/ group of
investors having budget around INR 25 CR can buy a floor in a Grade A facility.
There are small sized (around 30 k sqft) individual buildings for around INR 50
CR plus in some part of these locations. The supply of this real estate is
restricted and getting option aligned all parameters is difficult.
Average Returns on Commercial Real Estate Investing in Bengaluru
category, it is advisable to invest in commercial real estate properties
located in CBD, SBDs (Indiranagar, Koramangala, HSR) and ORR (Silk Board
junction to Hebbal). Supply of tenanted properties is limited and expected
rental yield is between 7% and 8%, whereas, if one is comfortable investing in
an under-construction project or greenfield stage with a good development firm,
rental yield can be achieved between 8% and 9%.
Land Investments (Growth Yield Assets)
planning to invest in land, the first thing you should be aware of is that
there are several different types of land investments available to you. To help
make your decision easier, here are a few options to consider.
· Converted Land
Average Returns on Land Investing in Bengaluru
Based on the
objective and ticket size, firstly, one can buy a piece of converted land
(generally priced around INR 3CR - 5 CR per acre along growth corridors of the
city). One needs to have a budget of over INR 25 CR to invest in this category.
It is a long-term investment; one needs to be invested for 10 years plus and
can expect exit price of 4X to 6X in 10-year period.
retail investors are investing in plotted developments across Bengaluru. It is
recommended to invest in projects along Bengaluru North, Old Madras Road,
Sarjapur Road and NE quadrant of STRR. To invest in a good development, one
needs to have ticket size of INR 1CR and can expect annual ROI of over 20% for holding period of 10 years.
Third type of
land investment now available with investor is agricultural
lands. Many investors are buying land parcels around 40 kms to 50 kms from Bengaluru
city for around INR 30L to INR 45L per acre. Most of these land parcels sized
around 50 acres plus. The most preferred locations are off Bellary Road,
off-Old Madras Road, off-Hosur Road and off-Kanakpura Road. This type of land
is expected to have an exit price over 5X for 10 year holding period. It is
difficult to get a smaller land parcel, if available it would be expensive
compared to larger parcels.
Fourth type of
investment is for retail investors who intends to invest less than INR 1 Cr.
Now, many developers are developing farmland developments. This type of
developments provides experience, small regular income mostly in the form of
produce and long-term appreciation. The expected annual ROI for this product is
20% for holding period of 10 years plus.
commercial real estate investment and land investment opportunities
are available in India's one of the fastest growing city - Bengaluru. Based
on the ticket size, objective of investment, management capability, and risk
appetite one can choose a suitable option regarding the product type (rental
assets, converted land or plotted development) to start and grow investment in
leverage rental assets, converted land and plotted development but loan is not
available for agricultural assets. Investing in
physical assets is better compared to investing in a property via shares on
account of tax benefits.
Yield Space Team can assist you in
identifying the best suitable Real estate Investment and help you to monetize
your Real Estate Assets.