How to get started in Commercial Real Estate Investing & Land Investing in Bengaluru

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 farmland).

Bengaluru has 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 Bengaluru

Now let’s investigate type of different investment options available in various geographies and ticket sizes.

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

In this 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)

If you're 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

·         Plotted developments.

·         Agricultural Land

·         Farmland development

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.  

Secondly, many 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. 

Conclusion

Multiple 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 real estate.

Investors can 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.