The IT capital has surpassed both the commercial and political capitals of India as the top investment destination in the property market.
Nearly 13 per cent of over $6.7 billion Rs 44,450 crore that PEs have invested in India’s property market from 2013 through the first half of 2015 has gone to Bengaluru.
Global property consultancy Jones Lang LaSalle’s (JLL) latest Asia-Pacific City Investment Intensity Index ranks the southern city Bengaluru among the top-20 destinations globally. At the 20th position, it is well above New Delhi (34th) and Mumbai (42nd). JLL had earlier this year listed Bengaluru among the top-20 technology-rich cities globally.
“Despite being a smaller city than the political and financial capitals of India, it has managed to attract a lot of investment in comparison of its size,” a JLL report said.
The investment intensity index provides a measure of real estate market liquidity and is a barometer of a city’s overall attractiveness to investors based on direct real estate investment over a three-year period. “Real estate investment is generally difficult for foreigners in India, and investors looking to take part in market growth may need to go through routes such as debt deals and joint ventures with local partners,” said Anuj Puri, chairman and country head at JLL India. “The index advises investors to continue to seek core business park or office investments in Bengaluru.”
Leased office assets such as IT parks and IT-SEZs attracted significant interest from foreign investors as they continue to ramp up their portfolio of office space. This is primarily due to low risk owing to high occupancy levels along with stable rental yields and significant potential for appreciation in capital values. “Bengaluru’s office market has seen the highest commercial space absorption in the country and continues to retain the spot. This, along with the consequent job creation, would throw up opportunities in residential space,” said Rubi Arya, executive vice chairman at Milestone Capital Advisors. “We are keenly watching the market given the momentum.”
Milestone has invested more than Rs 120 crore in an asset at Electronic City in south Bengaluru. The fund has been receiving interest from high net-worth individuals for picking up stake in this fully leased property , Arya said.
Ambar Maheshwari, chief executive of private equity funds at India bulls Asset Management Company, said both the residential and commercial markets in Bengaluru were more vibrant and mature than any other property market in India.
“As a thumb rule, every 100 sq ft of commercial space absorbed leads to demand for 600 sq ft residential area. In terms of commercial space, Bengaluru is the biggest market and that explains investors’ interest,” Maheshwari said.
Cities like New York, London and Tokyo almost always rank at the top in commercial real estate investment volumes. The top five cities in the Asia-Pacific region are Tokyo, Singapore, Seoul, Sydney and Hong Kong, ranked by three-year rolling direct real estate investment volumes though the second quarter of 2015.
Source : ET, Nov, 2015