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Real Estate Lending 101 – What is Construction Finance?

Construction Finance has been a popular loan segment which has been keenly observed by stakeholders beyond the real estate sector as well, as it acts as a barometer of construction activity to a certain extent. CRE Matrix, through this blog article, takes you through the A to Z of construction finance.

commercial real estate

What is Construction Finance?

Real estate developers need a consistent flow of funds for numerous construction-related works at various stages of projects to guarantee the timely completion of projects. Construction Finance loan is generally intended to meet this need of real estate developers across the life cycle of their intended or ongoing construction projects against the project sales receivables.

Since they are deemed to be comparatively risky, construction loads tend to have higher interest charges as opposed to conventional mortgage loans.

Why Do Contractors Need Construction Finance? 

Construction businesses generally have huge up-front expenses that burn through cash at the commencement of a project, much before payments start rolling in. This gap makes it tough to monitor cash flow from the beginning of a job. Contractors usually require financing to progress: to pay for material expenses on larger projects, to fund new equipment, or to match escalated payroll expenses. Financing can aid construction businesses to smooth out cash flow cycles whether the economy is declining or proceeding towards a construction boom.

Features of Construction Finance 

  • Loans that can be availed by the best real estate developers/builders
  • Can be used for growing and building residential or commercial sites
  • In Tier 1/Tier 2 cities, customized offerings to suit the requirements of  developers

Benefits of Construction Finance 

  • Professional and transparent technique
  • Organizing enormous funding from banks/financial institutions arranging bank guarantees
  • Flexibility in tenor as well as offering a variety of options for repayment
  • Enable tie-ups with banks/HFCs to offer housing finance to customers (home buyers)
  • Strong and effective service delivery model that provides door stop facilities to guarantee simple and quick approval and disbursal of loans

In a nutshell, construction finance loans are usually taken out by real estate developers or homebuyers who are custom-building their own houses. After construction has concluded, the borrower can either refinance their construction loan into a permanent mortgage or acquire a new loan to repay the construction loan (occasionally referred to as the ‘end loan’). 

The borrower might only be needed to pay construction loan rates or interest on the loan while the project is still ongoing. A couple of construction finance loans could entail the balance to be paid off completely by the time the project is complete. 

CRE Matrix, via RE Loans, gives a detailed insight on construction finance loans by numerous developers across the country and the banks/NBFC/funds that provided the loans to them. CRE Matrix is the country’s most preferred authentic analytics platform that allows stakeholders to access analytics from an array of sectors. Users can assess and compare construction finance loans and do so much more on CRE Matrix platforms.

For more CRE industry insights and data research do contact us.

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Real Estate Leasing 101 – Deep Dive into Rent Free Period

When drafting a leasing contract, both tenants and landlords need to be mindful of all the clauses that are present in a commercial lease agreement. There are numerous general clauses in a rental agreement form.

However, specific clauses are significant in their effect on the lease relationship and need to be given extra attention while preparing agreements. A couple of these clauses comprise of the security deposit, rent-free period, force majeure, indemnity provisions, and the right to renew or prolong the lease.

Let’s look at rent-free period in detail:

What is a Rent-Free Period?

The rent-free period is approved by both the tenant and the landlord. Therefore, the renter is not obligated to pay the rent during this time. This duration is used to facilitate the tenant to set up and establish all the needed equipment for them to utilize the commercial property for the proposed reason.

This duration can increase from three months to eleven months, contingent on the scale and extent of installation needed in the property. This period can also be stretched if the requirement arises. Nevertheless, it would be good to cite the maximum length of the rent-free period after joint agreement between the two parties. A clause declaring that the fit-outs may be eliminated and taken back by the renter can also be integrated in a commercial lease agreement.

Benefits of a Rent-free Period

  • If the landlord is promoting a new lease of commercial property and wishes to provide a rent-free period as an incentive to prospective occupiers, particularly if renters are apprehensive about startup expenses or footfalls in the present economic climate.
  • If a significant ‘fit-out’ work is required to place the commercial property into an appropriate condition to permit the tenant to trade. In such a scenario, a rent-free period will facilitate the renter to make use of the cash which might otherwise be utilized on rent to execute the works and enhance the condition of the premises. For instance, if work is essential to fulfill the health and safety protocols for a restaurant, or if the occupier is altering the use of the property and needs to basically modify the layout.
  • It can assist the renters’ cash flow during an existing lease, with a view to enable the future landlords’ rental yields. In this case, negotiation could have a landlord consenting to a lower rent with their occupier during an existing term in return for other revisions to the lease. For instance, if there is a break clause, the tenant assents to push back their ‘break date’ or relinquish their right to break and thus essentially extends the overall length of the term (by a tenant waiving their capability to end a lease early).
  • If the lease is about to expire soon and the landlord wants the existing tenant to continue with their arrangement, then a rent-free period clause could be offered to the tenant. It can be a way to mitigate the renters’ temporarily delayed cash flow, instead of forfeiting their lease or having to take other enforcement action.

In a nutshell, rent-free periods are especially common when times are tough economically. This specific incentive is offered to motivate tenants to sign leases. It is interesting to reflect as to why a landlord does not lower the level of rent and instead opts for rent-free period as this allows him to charge the same rent from other prospective tenants, who may not fully know about the rent-free discounts.

At CRE Matrix, we dissect every lease and figure out the effect of rent-free period on the overall lease economics.

For more CRE industry insights and data research do Contact us.

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Real Estate Leasing 101 – A to Z about CAM (Common Area Maintenance) Charges in India

Negotiating a lease for your business is not only a complicated procedure but if you’re a novice at it, you will most likely stumble into several new, possibly confusing concepts. One such term is common area maintenance (CAM). This is the fee that tenants pay in commercial leases for areas that are common to all renters. 

What exactly are Common Area Maintenance (CAM) Charges?

There are numerous tenants in a commercial building and the shared areas need to be maintained regularly. A CAM (Common Area Maintenance) expense is a surplus expenditure, in addition to the base rent, paid jointly for the maintenance of the commonly owned premises like the lobbies, elevators, parking lot, laws, corridors, public bathrooms, and building security. 

They are fees paid by tenants to landlords to assist in covering expenditures related to overhead and operating costs for common areas. CAM rates are generally described in the lease agreement to dispel any uncertainty as to what they might entail. It is vital to completely comprehend these charges prior to signing a new lease. 

How is CAM Fee Computed?                                                                             

At the commencement of every year, the property manager projects common area maintenance chargesfor the property in its entirety or a part of the yearly budget. Then, that CAM estimate is split correspondingly across the tenants in the building. Your percentage of the charges is gauged by dividing your square footage by the gross leasable portion of the building. This total cost is computed into your monthly operating outlay, so it can be paid in little increments all through the year. 

Is CAM Fixed or Variable?

The CAM fees can either be ‘fixed’ or ‘variable’. The tenants need to get it incorporated in the lease agreement as to what type of common area maintenance charges they will have to pay – whether it is fixed or variable. If it is variable, then it must be explained on what factors the fees diverged. Then, it must also be included in the contract as to what percentage will the CAM fee be raised from one year to another. Tenants need to be aware if they are charged with ‘administrative fees’ apart from the CAM fees and what would be the separation of charges for the two. 

Drawbacks to Avoid 

Utmost care needs to be taken when consenting to the CAM charged by the tenant. It is highly recommended to scan through the financial documents of the landlord carefully to reach the accurate CAM fees or to clear out the anomalies in the CAM charges in real estate suggested. What encompasses common area maintenance charges is described roughly to pass on the operational expenses of the commercial building as much as possible to the tenants. 

Unless the lease agreement specifies what comes under the CAM charges, the tenants are counseled prior to signing the lease agreement to get a clear understanding from the landlord about the following:

  • Salaries of the supporting staff as well as the security guards in the common areas
  • Insurance expenditures of the building
  • Restoration and revamping of the building, parking lot, and any supplement to the building at a later stage such as solar panels of the rooftop and so forth. 
  • Electricity and water charges in the expenses in the common areas. 

Where can you find the CAM charges in the building which interests you?

At CRE Matrix, we have analyzed over 1 Lakh lease documents across the country and many of these contain CAM charges. CRE Matrix is the India’s most favorite authentic analytics platform that allows stakeholders from different industries analyze CAM charges and much more.

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Introducing the 2021 India Office CRE Matrix Quarterly Report: New Research on Key Players Gradually Returning to Office and its Impact on the Economy

Even though the pandemic had a huge impact on India’s rising office segment with occupiers cutting back on spaces, surprisingly, 2021 has showcased the return to normalcy; with essential occupiers going back to office. With the Omicron variant putting a break on the momentum in January 2022, there is immense faith that a powerful recovering economy and a strong advancement in India’s startup ecosystem are expected to move the growth trajectory upwards.

Our objective with the 2021 India Office CRE Matrix Quarterly Report is to share key insights into office demand, supply, rentals, vacancy of Grade A office spaces.

Key Takeaways from the 2021 India Office CRE Matrix Quarterly Report

As per the India Office Report Q4 CY’21, there has been an increased demand for office leasing, rise in office stock, stabilization of office vacancy, an increase in rentals, and continued job growth in the startups space.

The insights make it clear that even though a complete ‘Return to Office’ was not achieved, there were significant strides that were taken. Thanks to the rise in digitization across all sectors and the increase in vaccination numbers along with milder symptoms of new variant, there is hope that office demand in 2022 may revert back to pre-Covid levels.

  • Office leasing in India observed a magnificent recovery. The last quarter of 2021 witnessed 12.1 msf of office demand. Interestingly, this was nearly 80% of the demand viewed in Q4 2019 (pre-Covid). On a yearly basis, the demand rose to 30% as opposed to CY’20.
  • Industries who made the most demand on office leasing continued to be Tech (startups and IT/ITeS majors), BFSI as well as Co-working segments. They contributed nearly 58% to office demand in 2021 and 63% in the last quarter.
  • New deliveries in Q4 2021 stood at 1.6% of the total present office stock and the entire year of 2021 added 6.2% to existing office stock. Hyderabad and Bengaluru, with 10 million square feet apiece, delivered half of the total stock in 2021.
  • The office vacancy in India finished the year at 16.5% – approximately 210 basis points (bps) more when compared to the end of 2020. After witnessing nine quarters of increases, office vacancy is now steady and will probably reverse in 2022. Bengaluru and Chennai observed a decline in vacancy as opposed to Q3 2021. Overall, Chennai was the only city to see a drop in vacancy.
  • Grade A office spaces for rentals has seen a steady and gradual increase. Since market rents continue to more expensive than passing rents, we can safely say the pandemic-related concessions are behind us.
  • Job development in the Startups space is expected to continue growing and a complete ‘return to office’ is believed to happen by the end of Q2 2022, if not earlier.

Download the complete India Office Market Report Q4 for key insights and to understand how the economy is impacted thanks to players returning to office.

What CRE Matrix CEO Abhishek Kiran Gupta shared about the 2021 India Office CRE Matrix Quarterly Report

The world is dealing with the biggest public health crisis in recent history which poses immense challenges. While we do not expect it to disappear overnight, the economy has witnessed resurgence in the last year, particularly in the final quarter of 2021. There has never been a more significant time for the rise in demand for office leasing, especially after the kind of damage caused to the economy owing to the pandemic. Thanks to digitization across all sectors, we will most likely witness growth in office demand this year.”

About this Study

CRE Matrix has conducted this research based on authentic registered data collected across 6 major cities of India – MMR, NCR, Bengaluru, Hyderabad, Pune and Chennai. We have also done extensive research for occupancy and upcoming supply with the help of our large feet on street team. Also, our interactions with key stakeholders in the commercial real estate sector has also helped us in understanding the current scenario and the upcoming trends in this segment.

Download the complete 2021 India Office CRE Matrix Quarterly Report here.

For more CRE industry insights and data research do Contact us.

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A 10-Step Guide to Becoming a Superstar Commercial Real Estate Broker in India

The Indian real estate market is quite diverse yet dynamic and competitive in nature, especially for real estate brokers. To carve a niche of success, it is quite imperative for brokers to understand the changing promotional scenarios of the developers and the preferences of clients. Having a knack to innovate and being open to new marketing ideas helps one to stay relevant and afloat in the market.

If you are looking forward to becoming a superstar commercial real estate broker, here is a 10-step guide:

1.   Network to increase your net worth:

Even though commercial real estate broking is a traditional profession, if you want to tap more opportunities and convert them into success, networking is the key. Be in constant touch with your fellow real estate agents inquiring them about the latest market updates along with some tips and tricks.

If you do not specialize in a certain kind of segment, pass on the lead to them asking for the commission percentage that can be mutually agreed upon. Attend project launches and events, meet new people and stay in touch with your old clients who have deep pockets to invest in real estate properties.

2.   Embrace digital technology:

As we mentioned earlier, the market is evolving at a very fast pace and you have to march ahead to set your cash registers ringing. Take optimum advantage of digital technology by building and having a constant online presence on various platforms such as Facebook, Instagram, Google My Business and LinkedIn to reach directly to your target market.

Promote your brand along with the projects assigned at the reasonable cost involved with a digital presence.

3.   Be a consultant, not just an agent:

Rather than just weighing your prospect in commercial terms, go the extra mile and suggest to your client the property that will best suit his or her taste and requirement. This will help you build long term relationships and instill trust in the mind of your clients.

4.   Be transparent:

It is very crucial to be transparent in all your dealings with the developer as well as the client to close the deal in an efficient manner. You will have to be very crystal clear in all of your communication with all the parties involved to win their acute level of trust beating the competition in the market.

5.   Gain your expertise:

As we discussed earlier, the market of Indian real estate is quite diverse and versatile having a pie for everyone. But it is necessary for you to find your area of expertise, be it commercial or residential and further segregate it between luxury, mid-segment or affordable segments. This way, you will be renowned within the market and industry as a whole.

6.   Never forget your old clients:

Now, this is very crucial and important as your old clients as your best brand ambassadors. If you have catered for them well, they will surely recommend your name within their social circle making you earn more referrals.

7.   Gather market insights:

There are new project launches as well as new norms getting framed on a constant basis. It is significant to keep your eyes and ears open to find out what’s happening in and around your domain as developers and clients also look up to you as an industry expert.

8.   Ask for referrals:

Never shy away to ask for referrals from your existing clients. It will help you to network and grow your business within an environment that is ever competitive and dynamic in nature.

9.  Go an extra mile:

Always go the extra mile to offer excellent customer service to your clients. It can be gifting a small present on the occasion of their housewarming or helping with the contact numbers of plumbers and other technicians that will ease out their domestic chores.

10. Build a brilliant team:

With gradual growth and success, you will need more minds and hands to help you. Over a period of time, build a brilliant and efficient team that will help you accomplish your business objectives.

Even though the real estate brokerage business is traditional, it is evolving at a quick pace and is an integral part of the industry. If you think that it is the right match for your professional life, dive into it.

For more CRE industry insights and data research do Contact us.

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How Indian Family Offices Can Leverage Real Estate Analytics

What is a family office? It is a private wealth management service provided to ultra-high net worth investors to concentrate and control over family finances, legal issues, tax, and administration matters. It is believed to be an outsourced solution to regulate the financial and investment dealings of people or families. It operates to offer an optimal solution for developing, maintaining, and transferring family wealth. 

A family investment vehicle or family office is considered to be either a single-family office or a multi-family office. A single-family office backs one family but a multi-family office supports at least two families. Family Offices are growing in India as the country has new billionaires every year. There have been approximately 100 Family Offices that have come up in the past decade or so. 

For quite some time, real estate investing was propelled completely by speculation, educated guesses, and gut feeling. This is why investors kept repeating the same mistakes many times. While risk cannot be fully eradicated, real estate data analytics lets people make informed decisions about lucrative investments, thereby reducing the risk greatly. Today, real estate analytics can be used to increase wealth and enhance their competitive advantage. 

Let’s look at the ways Indian family offices can leverage real estate analytics:

Location

Data analytics provide significant insights into the existing trends in real estate investment. Locations can be evaluated based on factors like traffic congestions, school ratings, quality of life, and crime rates. Moreover, real estate data can aid in assessing how lucrative a location will be when it comes to occupancy prices, average rental income, and even the ROI of the area. 

Being able to zero in on the most optimal locations swiftly lets Indian family offices remain one step ahead of the competition in seeking rental properties. It also saves them the hassle of conducting prolonged searches via traditional research approaches. 

Pricing 

Whether a family office is interested in either selling or buying, price optimization is critical for building wealth in real estate. Indian family offices need to comprehend the market they are operating within to make the best possible pricing decisions. 

Quicker and More Precise Appraisals 

Acquiring an appraisal is very significant before purchasing or selling an investment property. Real estate data analytics offers a lot of details about sales for comparable properties in the same area. Investment property analysis makes it effortless for valuators to deliver price estimations swiftly to family offices. 

Commercial Trends 

Commercial real estate investment is generally more large-scale and complex as compared to residential property investment. Thus, investing profitably in the commercial property needs detailed and comprehensive real estate data analytics on consumer trends. It will help family offices make a more informed decision. 

Competition Analysis 

Real estate data analytics can help family offices assess the performance of their competitors who are in the real estate industry. Which firms are believed to be the most trustworthy? Who is selling the most? What consumer rating do they have? What kind of promotional techniques are they using? Family offices can also make use of data analytics for profits, sales figures, and customer reviews to evaluate their performance.

Tenant Targeting 

Using predictive real estate data analytics, family offices can help decide who their tenants will be in the following years. Data analysis makes it more effortless for family offices to target their marketing properly. 

Real estate markets are believed to be unstable, complex, and always in charge. Thus, Indian family offices would benefit from real estate data analytics to make intelligent investment selections and increase their return on investment. Thanks to data analysis, family offices can accurately assess where and when to invest, as well as decide the appropriate value of properties. 

For more CRE industry insights and data research do Contact us.

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Lease Rental Discounting in Commercial Real Estate Lending – What it is and Why it is Growing in India

The market for real estate is massive in India. This industry is believed to generate the second-highest employment, after the agriculture domain. It is also estimated that this industry will acquire more non-resident Indian (NRI) investment, both short-term as well as on a long-term basis. Among the metropolitan cities, Bengaluru is projected to be the most preferred property destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi, and Dehradun.

BKC as CBD

With a growing market, top banks in India are introducing Lease Rental Discounting (LRD) for commercial real estate firms in India. Let’s take a look at what LRD is and why it has become popular in India:

What is Lease Rental Discounting (LRD)?

Lease Rental Discounting (LRD) is a tool that is used to get loans sanctioned from banks by making use of rental receipts as collateral. The bank will inspect the long-term cash flow and offer the loan based on the same amount. The loan is then owed by the rents promised. 

Variables Considered by Bank When Offering Loan

To assess if you’re eligible for Lease Rental Discounting (LRD), the bank will examine numerous elements which comprise of:

• Worth of your property
• Your position to repay
• Other possessions you own
• Liabilities that could happen

How does Lease Rental Discounting (LRD) Run?

Lease Rental Discounting (LRD) loans function on the basis of rental properties being owed a fixed amount of rent. Tenants agree to a lease agreement with the owner of the property. This arrangement commands a regular payment, referred to as rent. The property owner can make use of rental receipts that are made for the lease period as collateral while requesting a loan. 

This procedure is streamlined as rent and is dispatched directly to the bank as EMI instead of reaching the owner. Every bank has its own condition when it comes to the amount of the loan against property. But, on average, you can acquire up to 70% of the property estimate in the loan amount. 

Why is it Growing in India?

The popularity for Lease Rental Discounting (LRD) has been rising in India because the price at which commercial property developers borrow loans making use of rental receipts from lease contracts as collateral – have gone as low as 6.5% below this decade due to the surplus liquidity with banks that faced issues in dispatching credit during the Covid-19 pandemic. 

Overall, the rates for Lease Rental Discounting (LRD) have dropped up to 200 bases points in the last 18-24 months. According to real estate fund managers and investment bankers of India, for the first time in several years, they have gone beneath the capitalization (cap) rate in the nation. 

Benefits of Lease Rental Discounting (LRD)

Expansion of Business

This property owner can go ahead and further invest in property by making use of the loan sanction from Lease Rental Discounting (LRD). 

Tax Benefits 

Tax deductions are available by possessing additional property. 

Balanced Cash Outflow

The borrower can gain from a balanced cash flow as EMIs can be repaid using the rent money payable by tenants. The money received in a loan offers additional revenue via investments. 

Low Capital Expenditure 

The capital acquired from the bank loan significantly aids in decreasing personal expenditure when spending on more businesses or properties. 

For more CRE industry insights and data research do Contact us.

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5 Major Forces that will Drive Commercial Real Estate Industry in India in 2022

In 2021, there has been a tremendous development in residential and commercial real estate in India. The market was already growing as the requirement for residential apartments and plots rose post nationwide lockdown. The property rates observed a huge increase in demand and prices per square foot.

commercial real estate

Apart from commercial areas that tailor to the daily or weekly needs of the residents, the corporate world has started to convey interest in mounting operations, thanks to enhancements in connectivity and anticipated economic development.

We could witness further liquidity transferred into commercial real estate this year. It is believed that the year 2022 will see a growing surge for appropriate workspaces, freehold commercial and residential properties, and new concepts that will increase returns for investors. 

As we go deeper into 2022, here are a couple of forces that will push the commercial real estate industry in India.

Residential Property Market is Expected to Rise

After an extended duration of dropping and then stabilizing, residential property rates are possibly expected to begin rising again. Approximately 5% capital value growth has been estimated for the residential property segment in India in 2022. 

Several of the supply and demand-side factors are taken into consideration and evaluated over the last decade. This drive is projected to continue in 2022 as potential homebuyers’ preferences for larger residences, improved facilities, and lucrative pricing will help seal the deals. 

Foreign Investment is Estimated to Push this Sector

Foreign Direct Investments (FDI) will continue to be a significant development driver, and the same is valid in the case of the real estate players as well. Indian real estate has managed to draw a huge amount of foreign moolah, particularly in the residential market. With RERA assuring transparency and laws permitting 100% FDI in construction, Indian real estate is observing pointed investment infusions from NRIs. 

Property Rates Projected to Rise

In 2020, approximately 1.38 lakh housing units were sold. When you pit it against the previous peak in 2014, this was considered to be a rock bottom of 60%. Nevertheless, between January and September 2021, 1.45 lakh units were sold. There was a 5% surge in sales in 2020. 

Increase in Demand for Co-working Spaces

In 2020, there was significant growth in office closures and a swift shift in ubiquitous remote employment globally. This trend carried on in 2021. However, as the vaccines started rolling out, people slowly returned to their workplaces. Thanks to the pandemic, firms have had to spend time and money investing in digital abilities to let employees work from home. 

Businesses are seeking new working approaches while allowing workplace flexibility to make sure that profitability balances well with employee well-being. The most obvious development has been the surge of a hybrid workforce across an array of workspace choices, including flexible offices. 

Growing Demand for Data Centers

The massive digital push generated by the COVID-19 pandemic has been lucrative for data centers which could still offer an approximate 15% rental yield. Firms started to modify their digital infrastructure to cater to the new work environment instantly after India went into lockdown due to the pandemic, thereby leading to a 25-35% increase in data center capacity. 

The year 2022 is also believed to observe an increase in SCO (shop-cum-office-space) concept development. These SCO plots will assist entrepreneurs to develop their business concepts by owning a commercial space at moderately placed prices with advanced amenities. Sharp investors can witness the benefits of a well-equipped setting that backs retail or office in a favorable market. Mixed-use commercial spaces will help investors in expanding their risk in the investment portfolio by making the most of the new evolving idea. 

For more CRE industry insights and data research do Contact us.

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Andheri West – What makes it the preferred office and housing destination for developers, investors and homebuyers?

Andheri_ West

Andheri West has witnessed a phenomenal Real Estate transformation over the last 15-20 years. Starting with the Mumbai International Airport and Mumbai suburban local train station to Mumbai’s first Metro Line, two upcoming metro lines and upcoming Coastal Freeway. All these infrastructure developments shall help connect Andheri to all other parts of Mumbai – Northern suburbs, South Mumbai and Eastern Suburbs. Andheri West is one of the prime examples among Mumbai City Micro-markets which boasts an amazing mix of Office buildings, Shopping Centers, Retail High Streets and High-end Residential. Andheri West’s population is approx. 400,000 with about 100,000 households having an average monthly income of INR ~150,000. The housing market in Andheri West has always been buoyant and continues to witness the same trends given consistent new job creation and quality housing development. In 2019 and 2020, Andheri West witnessed housing sales of ~2,200 units and ~1,500 units respectively.

Andheri_West

The total commercial office stock at Andheri West stands at about 4.5Mn sqft. However, there are a greater number of Grade B office buildings in Andheri West compared to Grade A buildings. Given the lack of new Grade A office supply in Andheri West, secondary (older) office sales market has been more active compared to the primary office sales market among investors. The offices market in Andheri West has historically been an investor driven market and we foresee the same trend to continue. Andheri West Offices Capital Values appreciated by 15% in the last 5 years alongside rental yield of approx. ~7%, giving the investor a handsome annual return of ~10% per year. We strongly believe investors will prefer investing in new Grade A buildings compared to older supply. Five new Grade A commercial office buildings are under various stages of construction, totalling to approx. 900,000 sqft. In the past, both occupiers and investors have shown preference for offices sizes up to 2,000 sqft carpet area, primarily because the key occupier sectors have been BFSI, Media & Entertainment, CAs, Lawyers, etc.

Contrary to common belief that Bandra-Khar Linking road is the most active High Street in Mumbai, we would like to differ in opinion. We believe High-Streets of Andheri West have a wider spread not only in terms of size but also in terms of number and quality of retailers. Andheri West High-Streets can offer you everything from clothing to electronics, from jewellery to automobiles, from F&B to fashion accessories. Given the thick housing market, most private and PSU Bank have multiple bank branches and ATMs in Andheri West. Similar to the office asset, the high-streets in Andheri West have offered handsome annual returns of ~12% to its investors.

Related Article: BKC displaced Nariman Point as Mumbai’s CBD! Read on to know why BKC won’t be dethroned in the next 5-7 years.

Covid-19 has only augmented the need for mixed developments and self-sustained micro-markets with all asset types including offices, retail, housing, hospitality, healthcare, education etc. More and more people want to reduce their commute time, Work from Home and aspire to reside in vicinity of all possible recreation choices.  We believe Andheri West is one of the best micro-markets in Mumbai that offers all the above to not only home buyers but also to office commuters. To summarize, solid existing & upcoming infrastructure, robust housing demand, significant presence of high-end Retailer brands in Malls and High-Streets and growing office market, makes Andheri West one of the most attractive real estate investment markets for long-term investors.

For more CRE industry insights and data research do contact us

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The ‘Mumbai’s Next CBD’ Debate Settled

BKC as CBD

BKC displaced Nariman Point as Mumbai’s CBD! Read on to know why BKC won’t be dethroned in the next 5-7 years.

Bandra Kurla Complex (BKC) has witnessed a phenomenal transformation over the last 20 years. The State Government set the ball rolling by appointing MMRDA as the special planning authority to develop BKC (Bandra Kurla Complex) as an alternative to the erstwhile CBD (Central Business District) – Nariman Point.

After initial reluctance, some of the Private and PSU Banks and companies shifted their headquarters to BKC. The National Stock Exchange opened its headquarters in BKC in 2001. Soon after, developers realized the potential and picked up land parcels in the region to launch multiple Grade A+ commercial projects. The total stock at BKC stands at about 18 Mn sqft as on year-end 2020. Diamond Bourses (~2 Mn sqft) opened its doors in year 2010. As of today, some of these Grade A+ commercial projects command the highest rent in the country for office space.

BKC currently houses some of the biggest Indian and International businesses including Amazon, Netflix, GIA, Bank of America, GIC, Google, Novartis, Pfizer, Wework, Kotak Bank, National Stock Exchange, SEBI, ONGC etc. These occupiers employ more than 200,000 people who commute to BKC daily, fuelling the growth of social infrastructure such as restaurants, gymkhanas, schools, hotels, luxury housing projects etc. Reliance shall move its headquarters to Jio World Centre, a 7Mn sqft convention centre which is expected to house office spaces, luxury mall, hotels, a performing theatre, convention centre etc.

One of the most well-connected suburbs of Mumbai city, BKC is also the epicentre of most of the major existing and upcoming infrastructure projects – Mumbai Highways, upcoming Metro lines, upcoming Bullet train project, SCLR, Bandra-Worli Sealink, upcoming Coastal freeway etc. Such a central location advantage with convenient connectivity to Northern suburbs, South Mumbai and Eastern Suburbs gives Bandra a big edge over any other micro-market. BKC is also surrounded by prime residential localities such as Bandra West, Khar West, Santacruz West on the West and Chembur, Wadala and Vikhroli on the East. Existing physical Infrastructure makes it easier for residents in these localities to easily commute to BKC. Nearly 85% of all senior employees at BKC reside in these neighbouring suburbs.

We foresee further development in and around Bandra Kurla Complex not only for office complexes but for retail malls, cinemas and hotels over the next 5-7 years. Around 4-5 Mn sqft more Grade A+ commercial office projects are planned which will generate about 50,000 new jobs in BKC over the next 5-7 years. Till then, we can comfortably shelve the case file of ‘CBD of Mumbai’ with a seal of BKC on it.

For more CRE industry insights and data research do contact us