Commercial real estate investment in MumbaiCommercial real estate investment in Mumbai: Should you make

The Maharashtra government recently reduced stamp duty on housing units from 5 per cent to 2 per cent until December 31, 2020 to boost the real estate market hit by the COVID-19 pandemic. After December 2020, the state government will levy three per cent stamp duty on residential properties until March 31, 2021.

Experts say that the change in stamp duty will result in huge savings for buyers. Commercial real estate segments where investments can be made include office spaces, IT Parks, data centres, warehousing and logistic parks. There are expected to experience a constant rise in demand in the long run.

There are also several other factors which may make investing in commercial real estate a wise decision. Such as:

  • Multinational companies are eyeing India as a hub for Data Centre Offices, especially in cities like Mumbai, Delhi.
  • The current economic scenario is being seen as an opportunity to transact at a discounted price for bulk office spaces and large corporates are eyeing it.
  • From May to July this year, India witnessed deals of approximately 11 million Sq.Ft for commercial real estate and another 8 million Sq.Ft is expected to be absorbed in the future.
  • With economy unlocking, companies have started seeing stellar quarter-on-quarter growth. Real estate majors DLF reported over 98 per cent recovery in office rentals in the July-September quarter and is certain about demand and growth. Other real estate developers are now reporting similar numbers.
  • Real Estate Investment Trust (REIT) is gaining momentum in India after the first IPO of Embassy Office Park REIT, followed by Mindspace Business Park REIT. Corporate giant Tata Realty & Infrastructure (TRIL) are planning to list its Real Estate Investment Trust (REIT) which will add around 20 million sq ft of commercial assets in the next couple of years.

Sudarshan Lodha, Co-Founder, Strata told FE Online, “Mumbai has always been one of the most sought after real estate investment markets and even more so now. With ‘Unlock 5.0’ underway, the economic and commercial activity, especially in south and central Mumbai, is picking up which will consequentially result in gradual recovery especially the commercial real-estate (CRE) space offering a huge spurt to the rental market coupled with increased registrations.”

Lodha said that Mumbai being one of the country’s costliest real estate markets, the reduction in stamp duty has come in as a huge relief bringing down the payable on a sale transaction anywhere from six per cent to three per cent for now while in some other parts of the state, it has dropped from seven per cent to four per cent which translates into huge savings for the end consumer especially in case of investments in CRE.

Work From Home Short-Lived concept

There are fears that an increase in work from home trends may decrease returns on investment in commercial real estate. However, Lodha thinks the work from trend is temporary.

“We believe the ‘work from home’ is a short-lived concept and the industry will pursue a hybrid work model post the pandemic especially considering the nature of businesses that dominates Mumbai which yet again reiterates the growth in office realty.”

To invest or not?

“All in all, the reduction of stamp duty, discounted prices, low interest rates, weak rupee amongst others have cumulatively resulted in a great recovery in property registrations in Maharashtra’s real estate market – Mumbai is the fourth highest in terms of value and volume since April 2013,” he said.

According to Lodha, currently, the sale volumes in Mumbai are 30% higher than pre-covid levels and with MNC’s eyeing India as a growing market and investing in office spaces due to factors like cheap labour, discounted price and welcoming regulatory regime is only expected to add to the existing momentum.

“To sum it up, the financial capital of the country is a very promising real-estate investment market every investor should consider, even more so now considering the long term horizons and opportunities it brings to the table,” he concluded.

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