Real Estate investment: Why rental yield is important for the commercial segment

Real estate sector has always been home to retail and individual investors. After implementation of REITs (Real Estate Investment Trusts), the commercial space has further picked up among the realty investors, especially through rentals. However, the investment can't be done in a hurry. So, an investor must know the importance of the yield they would be getting from their investment.

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Speaking on the matter Harinder Singh, Chairman, Realistic Realtors said, "To start with, a good commercial gives the average rental yield of 6 to 8.5 per cent and rental yield from residential property is 1.5 per cent to 3 per cent. Same holds true for capital appreciation also in the current market scenario. The upsurge in commercial office space started in 2017 and a further boost was provided this year with the REITs in sight. As more liquidity will come in commercial property, developers will come up with more projects that are already required. In fact, tier II and tier III cities are witnessing a demand for commercial offices as prices in major cities are going skywards." 

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Pressing for investment in commercial real estate post-REITS Nakul Mathur, MD, Avanta India said, “In the current scenario we can foresee a demand of good quality office spaces in the near future as well. It is likely that many big firms will end their long-term leases to reduce operating costs and those who own these spaces might sell them. If this happens, more commercial space will enter the market in the areas where demand is more. Cities like Indore, Jaipur, Kochi, etc are coming up as places that are attracting investors in commercial spaces as these place promise good capital appreciation.”