INVESTMENT

HIGHER RENTAL YIELDS FOR COMMERCIAL PROPERTY

The valuations and returns in the commercial property market has been strong during the past two years. Rental yield plus capital returns are expected to be around 25% per annum for the next five years (as per Knight Frank report, May 2013). The same report states- “For the horizon, 2013-2017, the overall market scenario in Mumbai is likely to improve. Decelerating supply momentum coupled with improved demand will result in lower vacancy in the office market”.

As per Citibank report 2013, “Rentals have remained stable across most locations except Powai where rentals increased by 6% due to low availabilities”. Also going by the current vacancy rates as published in the Cushman Wakefiled research for the current year, Powai has lowest vacancy rates (4.3%) among all submarkets of Mumbai. This clearly points to strong market fundamentals and projected price achievement in the future.

The table below illustrates the movement of commercial Vs residential rentals (psf) clearly showing that commercial rental yield is 13% as compared to 3% in residential for a similar area.

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