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Tuesday, Sep 24, 2002

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Commercial property now attractive

Ajita Shashidhar

NEW DELHI, Sept. 23

INVESTMENT in and sale of commercial properties are gaining popularity in India over the last one year, thanks to real estate prices hitting an all-time low and attractive schemes being offered by various housing finance companies and banks.

The market has been buoyant over the last one year with investors not just looking at housing as an attractive investment proposition, but also gradually moving towards investing in commercial properties.

A developer who comes up with a new property rents it out and then sells it to a number of people along with the tenants. While the investor here gets an assured return, the developer churns enough money to invest in his next project.

Speaking to Business Line, Mr H.K. Varma, Vice-President, Marketing, Ansal Properties and Industries, says, "In such deals, the investor in a commercial property enjoys returns from day one, which can be anywhere between 12 and 13 per cent. This is in contrast to returns on a residential property which will be in the range of five and six per cent. Ansals has been providing such deals to its investors on a regular basis for a number of properties in and around Delhi.

Mr Sanjay Verma, Executive Director, Cushman & Wakefield, says that investment in commercial properties gave an assured return with zero per cent risk. "Investing in a bank would generate hardly six to seven per cent interest, while the stock market is risky. Real estate will offer at least 10 to 15 per cent returns depending on the locality."

Investment and sale of commercial properties is a well-established institution in the West, where they have a number of real estate mutual funds, as well as individual investors.

The profile of the investors in India, according to Mr Manish Kashyap, Head, Corporate Services, CB Richard Ellis, copmprised not only financial institutions, but also individuals. Mr Kashyap expects the market to grow rapidly once restrictions on foreign investors to invest in real estate are waived off.

In agreement with Mr Kashyap is Mr Varma of Ansals who says, "The foreign companies are governed by RBI and FERA norms which do not allow them to invest in real estate in India. Once these restrictions are waived off, one will definitely see the emergence of real estate mutual funds in India also."

Mr Verma of Cushman and Wakefield says that his company had closed transactions worth Rs 60 crore in the last six months.

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