Gone are the days when the only avenue of investing in the real estate sector was the housing sector and office spaces. Over the last couple of years, investors are seen turning to other offbeat real estate investment options to get the best out of their money.
There has been undoubtedly a major shift in the trend investors putting in their money into real estate. Here are some of the newer offbeat avenues real estate investment options:
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Co-working Space:
From a little over 5 million square feet last year, co-working operators are reportedly expected to lease about 7-9 million sq ft by 2020. Delhi-NCR and Bengaluru are expected to be the largest market with almost 55 percent of overall leasing by flexible space operators expected to happen in these locations.
Co-working spaces are increasingly gaining popularity from people such as business nomads, expats or those traveling to the country for a limited period, freelance workers, specialized people from advisory, consulting and designing domain as well as new age corporate.
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Student Housing:
Although from being there since forever, this is the first time that student housing is seeing an invasion of organized players. This segment provides an immense potential to those who have the appetite to invest as well as developers looking for rental revenue.
This segment is still in the nascent stage with some of the major players in the field are Stanza Living, Zolo, Oxfordcaps, Your Space and Placio. They usually charge on a per bed basis with a host of facilities such as food, WiFi, laundry, security, gymnasium, leisure activities, independent kitchenettes, food delivery, and even shuttle services to colleges thrown in.
As per a report by Federation of Indian Chamber of Commerce & Industry (FICCI) and JLL India, titled, ‘Future of India Real Estate: Deciphering the Mid-term Perspective’, student housing has the potential to yield more than 12 percent returns vis-a-vis the core commercial sector in which returns remain rangebound between 7 percent and 10 percent, Money Control reported.
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Co-Living Space:
While student housing targets students of school and colleges, co-living caters to young single working Millenials which currently accounts for 440 million. This trend is giving impetus to an organized rental market in cities such as Bengaluru, NCR, and Pune, the same way as co-working spaces did for shared office spaces.
Co-living operators typically take properties on long-term lease from property owners, bear the makeover costs, load the properties with amenities and invest in creating a tech platform for residents. The product is designed in a way to allow more people to be accommodated on the same floor plate and generate more rental income from it.
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Warehousing:
The warehousing assets are offering a higher cap rate around 150–200 bps greater compared to what commercial assets are currently offering. Going forward too, demand for large warehousing spaces is likely to see a steady increase as occupiers now want to move out of their smaller warehouses and consolidate their activities in larger facilities.
Warehousing industry is expected to witness a structural shift in the next 3-5 years as more and more organized players will enter the segment, resulting in sell-off by unorganized or smaller organized players. Also, warehousing will now no more be a mere space provider but an avenue of other value-added services as well such as packaging, small scale manufacturing, cross-docking, automation, algorithm-based demand forecasting and distribution centres.