A Kolkata-based investor recently acquired 2.17 lakh sft of commercial space from Embassy Property Developments for Rs 141 crore. The office space at Embassy Paragon in Bangalore's IT suburb Brookefields is occupied by tech giant Intel.
Bangalore's real estate sector has seen a spate of transactions where high networth investors (HNIs) have scooped up fixed rental income assets. Citrus Ventures, a realty startup backed by HNIs, is close to acquiring IDEB's Grand Mall on the city's Outer Ring Road for an upfront payment of Rs 60 crore, said sources briefed on the matter. This deal for a million sft mixed-use development involves rolling over Rs 300 crore debt from banks as non-convertible bonds. Another HNI group was in action to buy Jewels de Paragon, a city centre commercial property put on the block sometime ago.
Developers like Embassy and Prestige have tapped HNI investors to create liquidity in a high interest climate. Jitu Virwani, chairman of the Embassy Group, declined to comment on the Paragon deal. But these developers are known to have sold commercial space with high yields to rich individual investors or business families, who perceive the market in Bangalore to be more stable. Traditional business families from Kolkata and Uttar Pradesh, who in the past financed developers in cities like Chennai, have moved capital here in recent years.
"The commercial property prices in Bangalore are more affordable compared to those in NCR and Mumbai. Tenants here are more stable and pedigreed, given the dominance of the IT industry. And these are huge positives for HNI investors," says Anuj Nautiyal, executive director, Redwoods Capital, a real estate brokerage and asset management firm.
He reckons that Bangalore may now be the top metro in terms of HNI transactions by volume even though Mumbai and NCR would outstrip it by value. Standard Chartered Bank, Kotak Mahindra and ICICI Securities are pushing Bangalore's commercial real estate story to their private banking clients and often syndicating deals on their behalf for 10-12% annualized return. The city's realty is seen as more competitive and open, which often enables investors to wrest better deals.
"Warm shell commercial property in Whitefield is available for Rs 30 per sft and in the central business district at Rs 75 per sft. These are reasonable prices when one considers the quality rental income from marquee clients," says Vinod Menon, managing director, Citrus Ventures, a startup developer and asset manager that works with HNI investors. "The sustained buoyancy in crop prices - like coffee – in the south too has propelled private investor action in Bangalore real estate," he adds.
Bangalore's commercial real estate probably has the longest tenancy periods, which is a big deciding factor for HNIs who bet on hasslefree long-term investments. And developers such as Prestige have sold commercial projects in smaller tranches, of 5,000 sft each, making it attractive to rich individual investors. "HNI investors are better for developers as well since they, unlike private equity funds, are not in a rush to exit and book returns," Nautiyal says.
MONEY FLOWS
• Citrus Ventures is close to acquiring IDEB's Grand Mall on the city's Outer Ring Road for Rs 60 crore
• Embassy and Prestige have tapped HNI investors to create liquidity in a high interest climate
• Traditional business families from Kolkata and Uttar Pradesh, who in the past financed developers in cities like Chennai, have moved capital here in recent years.
Source: The Times of India
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