Domestic institutions renew their focus on commercial properties

MUMBAI | BENGALURU: Several large domestic institutions including private equity funds are raising money from both local and overseas markets with an investment focus on commercial assets in India.

While the appetite for completed and leased commercial assets continues to rise, many funds are even scouting for under-construction properties in prime locations as the outlook for rentals remain firm due to lower ready supply.

The segment is witnessing increased interest from private equity funds, with several large institutions focusing on completed and leased commercial assets for investment. Large domestic institutions such as ICICI Prudential AMC, Indiabulls Asset Management and Milestone Capital Advisors are raising new funds of about Rs 1,000 crore each to invest in office properties.

“Many commercial funds are investing in stabilised assets for yield. It is largely a domain for institutional and sovereign investors. The deal size is increasing and there’s high amount of liquidity for stabilised assets. Investors with deep pocket and longer durations will remain in the market,” said Rajeev Bairathi, Executive Director, Capital Markets, Knight Frank India.


Healthy surge in rentals across key business districts during the quarter ended June reinstated the growing prominence of Indian metros among the global regions of high-rent yielding commercial spaces, according to a recent report by Knight Frank.

During the quarter, sustained interest from the IT/ITes sector pushed rents in Bengaluru’s Central Business District by 4%, which is the highest among other key CBDs in India. The rent appreciation was also the third highest globally. Mumbai’s Bandra Kurla Complex and Connaught Place in Delhi also saw around 2% growth in rentals.

“Market timing for commercial realty investment is opportune right now as vacancy levels are at an all-time low and rentals have started to move northward. Also, there is supply shortage of right office properties and the scenario is expected to be like this for an extended period,” said Sandeep Chadha, partner at Milestone Capital Advisors.

Milestone Capital plans to deploy about Rs 1,000 crore in pre-leased commercial assets through Milestone Commercial Advantage Fund over the next one year.

The private equity firm is looking to raise Rs 700 crore equity through this fund by end of March 2018.

“Interest rates have been easing and that makes higher appreciation for these office assets possible in the backdrop of good demand from occupiers. While the deals may also not come cheap, the probability of superior returns in the backdrop of improving macroeconomic scene is much better. The fact that development risks and leasing risks are mitigated, these type of deals become quite attractive for investors,” said Ambar Maheshwari, CEO-Private Equity, Indiabulls Asset Management Company, that is raising Rs 1,000 crore fund to invest in commercial assets across key markets.