Investing in commercial property can give you returns in 2022-23; here's how

The residential and commercial real estate sector is a prosperous, sustainable and high-potential niche to invest in

Anurag GoelUpdated: Friday, June 10, 2022, 11:01 PM IST
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Experts would agree that the coronavirus pandemic had a positive impact on the real estate market. The sales picked up quite rapidly given the realization of the importance of owning a home. It brought the fence sitters back to the forefront of safeguarding their investments by purchasing real estate.

The residential and commercial real estate sector is a prosperous, sustainable and high-potential niche to invest in. Although the input costs are a bit higher than its residential counterparts, commercial investments are for a lifetime and promise consistent returns.

Here is a lowdown as to how commercial realty investment will prove to be a gem of your investment portfolio in 2022-23.

Healthy trends

According to the latest Outlook 2022 report of the Knight Frank, in comparison to the year 2021, both commercial and real estate sectors of India would experience stable and sustainable growth in 2022. With the mass vaccination drive been completed and minimal infection spread, the confidence in office spaces and commercial occupiers is at an all-time high and the demand is gradually increasing.

This fact can be corroborated by the joint report of colliers and Qdesq. The report highlights that the office spaces absorption will cross 60 million sq ft in metro and non-metro cities by 2023. The tepid demand for the last two years has converted into an agile and flexible work model and this is what is driving the commercial real estate demand. Large businesses dealing in IT-Business Process Management (IT-BPM), E-commerce and consulting would be the leading occupiers. The mentioned trends present an excellent opportunity for the investors to make an investment in commercial real estate.

Demand for co-working spaces

There has been an increased demand for co-working seats across India. Moreover, along with metro cities, top tier 2 cities such as Ahmedabad, Jaipur, Indore and Coimbatore are also attracting growing businesses town the flex spaces.

The rise in the co-working sector is an excellent opportunity for investors to include this niche market in their investment portfolio. With its sustainable rise from 2022 onwards, this can prove to be a source of handsome rental income.

Demand for data centres

A new yet revolutionary niche segment of the commercial real estate sector is the mushrooming Data Centers. Though the pandemic was challenging in almost every aspect, it was a blessing in disguise for the digital payment ecosystem. A tremendous rise in digital transactions has necessitated the setting up of data centres across India. Big IT giants are exploring both tier 1 and tier 2 cities for data centre establishments and this is a huge opportunity for the investors’ community.

With the rise in e-commerce activities, online education, data consumption and payment ecosystem, demand for data centres will rise by 25-35 per cent in the next two years, presenting an excellent opportunity for the investors.

To put it in numbers, the current capacity of the Indian data centre market is 445 MW. It is expected that an additional 290 MW will be added in the year 2022 alone. This defines the tremendous growth potential of the data centre market.

Moreover, the government’s mandate of data centres localization will force large IT companies to set up secure data centres across India.

Conclusively, the commercial real estate market has always remained a robust but low-key player in the real estate industry. It has proven to be a cash cow and will continue to do so considering the rapid rate at which the Indian economy is growing.

(Anurag Goel is Director, Goel Ganga Development)

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