Reforms needed to boost investments in commercial real estate

Commercial office real estate has been a booming investment class in India. With policy reforms, institutional investments, foreign partnerships and growth in the IT-ITeS service sector, the demand for grade-A office real estate has become very attractive as the top global investors are betting big even while there are concerns emanating due to work from home. With several notable government initiatives like Make in India, reforms like RERA and GST, and the coming of Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InvIT), India is expected to continue its growth in the commercial segment in 2021 and beyond, owing to assured and lucrative returns on investment.

To further propel the growth of commercial office real estate in the country, we expect the government to look into some of the key concerns to boost the economy. Stamp duty needs to be reduced and while Maharashtra has taken the lead in this, implementation of the same by other States too would be welcome. GST incurred on construction of immovable property to be let out should be allowed as input credit against the GST on rent receivable. GST on TDR and joint development of commercial properties could also be looked into. We hope the budget would allocate more funds towards IT infra spends involving digitisation of land records in urban areas. The government should also promote proptech companies by providing Credit Guaranteed loans to build blockchain implementation of property records. Since the growth of startups is likely to have a positive bearing on commercial real estate, it is important for the Government to address the concerns of these proptech and fractional investment startups too.

With the commercial segment is set to grow in the post-pandemic period, fractional ownership is one of the additional options for the developers to expand the market to get liquidity by selling commercial properties. While fractional investment opens new avenues for the office developers, it also offers an investment class to smaller investors which otherwise was available only to the HNIs, family offices and institutions due to the ticket size of owning large office space.

Fractional ownership in the real estate has been prevalent in the US and Europe which is enabled by few proptech companies. This concept is finding its acceptance in India now. For small and second home investors, it is one of the best ways to invest and own grade-A premium commercial properties and build a stable long-term income. Fractional investing also enables you to diversify by investing in multiple properties with smaller investments. It is an investment that offers both portfolio diversification and is superior to residential investment in terms of yield.

(The author is Founder and CEO, YieldAsset Real Estate Tech, a new age proptech firm)