Tag Archives: bangalore city

Bangalore likely to remain India’s top corporate real estate market

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Bottom Line: As India’s technology sector expands its horizons, Bangalore has emerged as a dominant growth frontier offering the country’s new economy sectors such as information technology, biotechnology, aerospace, research and development, clean energy and other services sectors, a new growth paradigm.

Bangalore City, Bangalore real estate market, India real estate news, Indian property market, NRI investment in Bangalore, Housing demand in silicon valley, Track2RealtyAccording to CBRE’s latest major report—Bangalore: The Star That Shines the Brightest—the city has led the country’s corporate real estate market among leading cities over the last five years in terms of office space stock as well as office space absorption trends.

Sustained demand for office space has consistently driven commercial real estate growth in the city that crossed a milestone in mid-2013—by becoming the first Indian office hub to join the global club for 100-million-sq. ft. office markets.

Furthermore, the year 2015 recorded the highest quantum of new office space supply of nearly 12.7 million sq. ft. The city’s overall commercial office stock stands at approximately 127 million sq. ft.; compared to other prominent commercial hubs such as Delhi National Capital Region (NCR) (95 million sq. ft.) and Mumbai (87 million sq. ft.)

Commenting on the report, Anshuman Magazine, Chairman and Managing Director of CBRE, South Asia said, “Buoyed by improved economic sentiments, steady corporate occupier interest, and its intrinsic strengths as a pioneering hub for technology, R&D, and shared services platforms—Bangalore is likely to maintain its leadership position in the country’s corporate real estate market in the long term. The successful implementation of the Government’s policy schemes, such as Digital India, Skill India, and Make in India, will be critical for the further development of the city’s business environment.”

As per an office occupier sentiments survey conducted by CBRE in India during 2015, Bangalore emerged as the most preferred market among Indian cities for occupier expansion strategies over the next two years. The city’s successful corporate space has been primarily driven by political stability over the years, the country’s largest expatriate population, and availability of top talent for business.

Other advantages offered by Bangalore have been its connectivity with other parts of the country, an extensive public transport system including its efficient bus network and partially operational Metro Rail (Phase I). Its well-established social infrastructure and good climate are other advantages that attract and retain businesses in Bangalore.

“Bangalore will continue to offer technology firms and allied sectors a stable business environment and access to a large, skilled labor pool. Consequently, while technology sectors and back-office operations will continue to remain the principle demand drivers, new sectors such as e-commerce, online start-up ventures and biotechnology will increasingly contribute to building the city’s commercial real estate skyline. These will play a positive role in supporting the long-term expansion of the city’s commercial office sector,” said Ram Chandnani, Managing Director – Transactions Services, CBRE South Asia.

In a little over two decades, prominent corporate firms have established a large footprint in the city and driven Bangalore’s commercial market forward. The availability of good quality office spaces at affordable rents as compared to office markets in Mumbai and Delhi NCR, and the cosmopolitan nature of the city, has further stimulated office space demand in recent years.

With the completion of numerous larger sized technology parks and Special Economic Zones (SEZs), Bangalore’s investment grade office stock grew exponentially from less than 20 million sq. ft. in the early 2000s to 127 million sq. ft. in 2015—at a compound annual growth rate (CAGR) of 13% over the last 15 years. This has placed the city well ahead of other leading Indian office hubs.

At present, corporate occupiers remain focused on the Outer Ring Road (ORR) stretch between Marathalli and Sarjapur Road; going forward, an incremental shift towards newer locations such as North Bangalore is expected. This is mainly owing to factors such as attractive lease rents, improving social / physical infrastructure and residential developments in the vicinity of the office clusters.

Bangalore rental yields defy national trend

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Track2Realty investigates what makes Bangalore rental yields highest in the country.

Bangalore City, Bangalore real estate market, India real estate news, Indian property market, NRI investment in Bangalore, Housing demand in silicon valley, Track2RealtyRamakant Sachdeva was recently transferred to Bangalore by his IT firm. The bachelor who had been living in a rented accommodation in Noida did not bother much. He had it in mind that he has to pay the rent more or less the same as he used to pay in Noida. As a matter of fact, he rather enjoyed his Bangalore transfer thinking that it is an opportunity to see a new city. However, his house hunt in the new city gave him a financial shock.

A man who was paying Rs. 12,000 as house rent for a 2BHK flat in Noida could not believe that he was asked to pay Rs. 35,000 for the same kind of apartment. An increase of 300 per cent in house rent threw his whole financial plans haywire.

“The cost of this flat is around Rs. 1 crore and they asked for Rs. 35000 as monthly rent. This is close to a rental yield of 3.5 per cent. I am not sure any other city in India is giving more than 2 per cent rental yield. This is unreasonable in a place like Sarjapur and the apartment is quite far away from the main road,” says the young IT professional.

Market analysts are not surprised. They are witness to the fact that Bangalore market has been defying the rental returns of other Indian metro cities for so many years now. They maintain that the absorption of office space is a true indicator of the rental yields of the given city.

As a matter of fact, the rental yield of 3.5% is on the lower side as per Bangalore standards. As per a report by Global Property Guide the rental yields in Bangalore are anywhere between 3.7 to 4.4 per cent. The report adds that this seemingly higher rental yields are nevertheless long way below the 2007 level where the yields had been in the range of 7.16 per cent to 9.92 per cent.

Trivita Roy Associate Director-Research & REIS, Jones Lang LaSalle India categorically says that if you compare it with other cities, the rents are far more affordable in Bangalore. “For similar projects if you go to any other city you will have to pay more. Also, from the owners’ standpoint since the prices are on lower side the rental returns are in the range of three to four percent.”

In Bangalore the absorption of office space has been more than 80 million square feet in the year 2015, which is way higher than other cities of India. It has been 50 million square feet in Gurgaon. In terms of the office space consumption per household Bangalore happens to be the only Indian city that is closer to the major global cities.

Ashish Puravankara, Managing Director of Puravakara Projects points out that in the last one decade the rental yields have taken a hit across the country, even touching one per cent in many places. The lower rental yields actually indicate tow things – either the capital values shooting up or the rentals not picking up at all. For me, the rental value represents the true nature of the housing demand.

“Somebody who has to live and cannot afford to buy a house will go for rental house. So, rental values are the true indicators of housing demand in the given market. The rental have grown at a steady rate but it is the pumping of money to buy a house in markets like Delhi or Mumbai that has led to rental returns shrinking up. In Bangalore it is higher because the capital values are more realistic,” says Puravankara.

In conclusion, there are strong economic fundamental behind the high rental yields of Bangalore that defy the average national rental yields. It may not be as high as some of the other global cities and may also not be at its peak today, yet the rental yields of Bangalore are more promising to any other key metro cities of India, including even the financial capital of Mumbai.

 

Azure to launch Rs 200-cr domestic fund next week

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india realty news, india real estate news, real estate news india, realty news india, india property news, property news india, india news, property news, real estate news, India Property, bangalore skyline, bangalore city, bangalore real estate news, real estate fund newsRealty fund manager Azure Capital Advisors will start raising around Rs.200 crore to invest in residential projects in the southern and western parts of the country from next week.

This will be the second round of fund-raising for the Bangalore-headquartered entity’s maiden fund, ‘India Realty Fund I’. Initially, Azure had plans to raise a fund with total corpus of Rs.350 crore, plus an overallotment option of Rs.150 crore, but investor apathy towards first-time funds led it to go for the first closure at Rs.50 crore last year.

The fund manager also has plans to launch a $150 million to $200 million (Rs.980 crore) offshore fund early next year to invest in residential and warehousing projects in the country, according to K Madhusudan, its co-Chief Investment Officer.

With the new fund-raising, Azure joins the domestic fund managers such as Kotak, ASK, ICICI Venture, which are raising domestic funds to invest in the realty projects. Due to turmoil in the global markets and restrictions on offshore funds, most fund managers now prefer to raise domestic funds.

But, raising new funds is not going to be easy, given the current environment when property sales have stagnated in places such as the National Capital Region and Mumbai.

Shapoorji Pallonji, which launched its $500-million realty fund this April, has got commitments worth $120 million and may go for the first close at $300 million, according to sources.