Daybreak - Owning a home makes you feel rich. Owning an office could actually make you rich

Episode Date: March 9, 2026

Indians put more than half their household wealth into real estate. But almost all of it goes into one kind: residential. Commercial property like offices, shops, warehouses, barely features in the average Indian portfolio. Some investors argue that that might be a mistake. Commercial real estate offers higher rental yields, steadier returns, and in some cases, fewer headaches than the family flat. And today, you don't even need a crore to get in. REITs, SM REITs, and AIFs have opened the door to smaller investors. But the office isn't a free lunch. The risks are real, and they're different from anything most Indian investors are used to.This is a read-aloud version of this story from The Ken.Tune in. 

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

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For many Indians, the idea of making it is closely tied to a simple milestone, owning a residential property. It is the ultimate symbol of stability. But here is a slightly more uncomfortable thought. What if the property that makes you feel wealthy is not necessarily the one that actually builds wealth for you. And that is the question that my colleague Anand Kalyanaraman explored in the story that I'm just about to read out for you today.

Anand is the Ken's finance editor and in this piece, he turns the spotlight on a part of the property market that most households rarely think about, commercial real estate. While homes dominate Indian portfolios, assets like offices and retail spaces often generate stronger rental yields and come with a different set of dynamics. And thanks to structures like the Real Estate Investment Trust or REITs and AIFs or alternative investment funds, you don't necessarily have to buy an entire office floor to get exposure anymore. But of course, there are caveats. Commercial real estate has its own

risks, cycles and quirks. And as Anand puts it, there is a lot. no free lunch. So here is Anand's story and it is titled, owning a home makes you feel rich. Owning an office could actually make you rich. Welcome to Daybreak, a business podcast from the Kent. I'm your host, Nick Dha Sharma and I don't chase the news cycle. Instead, every day of the week, my colleague Rachel Vargheese and I will come to you with one business story that is worth understanding and worth your time. Today is Tuesday the 10th of March. Indians love gold. Households here hold the world's largest stash of the metal.

But they love something else even more. Real estate. More than half their wealth sits in it, despite the post-pandemic equity rush. People are guided by their own considerations of asset class familiarity and life situation, said Vivek Rati, National Director of Research at Real Estate Consultancy, Knight Frank, India. So we see 50 to 554.

5% of household wealth in the country being rooted into real estate. But it's not purely an investment. A large part of it, Rati said, goes into consumption as well. That mixing, though, has created a skew. For most Indians, real estate means residential property. Conspicuously missing from most of their portfolios is its cousin, commercial real estate, which is arguably more rewarding with less hassle. In a poll, the Ken ran in its January story titled Where to Invest 1,000, 10 lakh rupees, and 1,000

1, 6th of the nearly 1,800 respondents said that they would seriously consider commercial real estate among non-traditional investment options. And why not? Residential real estate is heterogeneous and the yields are low, according to Dipesh Raghav, founder of Financial Planning Portal, Personal Finance Plan.com. For investors with a high surplus, say one crore rupees, commercial properties could be a good bet, he added. They yield fixed income-like returns and have potential for capital appreciation. What about a small investor then?

Enter real estate investment trusts or reeds. These companies that own, operate or finance income-generating properties, including office spaces, retail real estate and warehouses, allow their investors to take exposure in the sector without actually buying the property. Since their introduction in 2019, Reitz have democratized the real estate investment game. In 2025, amid a lacklustre stock market and falling interest rates, reeds delivered nearly 30% returns, outperforming stocks and burns. The rally, as research house Urca Analytics noted, was driven by steady cash flows,

attractive yields and rising investor appetite. Such returns, of course, are not guaranteed every year. But market regulator Sebbies move to reclassify reeds as equity instruments in late 2025 has widened the potential investor pool. Besides making them eligible to be included in stock indices, the move now also allows both domestic and global institutional investors to treat the asset class as part of their core equity allocation, noted a report by investment banking firm, a vendors.

The commercial real estate investment market has evolved significantly over the years, said Rohan Sharma, a senior director at real estate consultancy, JLL India. Earlier, there were limited, often suboptimal options like investing in the shares of a listed property developer or buying office or shop space, including under-construction properties from developers. Today, besides direct ownership, there are listed reeds, small and micro-reeds, and even alternative investment funds or AIFs. But even as they run on the double engine of fixed income-like yields and equity like capital appreciation, the risks are real.

Chief among them is non-occupancy. Regardless, commercial real estate is a great way to diversify an investor's portfolio from a residential asset heavy one. said Sharma. The case for a commercial property. For most people owning one house is home. Any additional property they may buy is an investment. From this practical prison, commercial property scores over residential real estate primarily because of high rents. Residential real estate is basically only a capital gainsplay, said JLS Sharma. That's because on an average, the rental yield or the annual rent on such properties in India is,

just 2 to 3% of the property value. The post-COVID period has been good for residential housing prices, he added. But the market has also seen down cycles, like between 2013 and 2019, when capital values state flat or even declined. In such a market, residential properties can be a bit of a drag on portfolio returns. By contrast, commercial properties yield higher returns of 6 to 7% on average. In high-demand areas, it goes up to even 8 to 9% said such in Jen, executive vice president of family offices advisory, Trigen Wealth. Leases also tend to be longer in this part of the real estate world, often running into a few years with annual rent escalations of 5 to 10%. Like in the case of a residential property, the value of a commercial property

two rises in the market's up cycles. In down cycles, rent provides the cost. cushion. In commercial properties, the total return is rental income plus capital appreciation. So even in down cycles, it gives investors the protection of meaningful rental income to justify exposure, said Rati. There is also a behavioral difference. Unlike residential properties that are often kept vacant by investors or owners, commercial ones are invariably let out to make investment cents. Over the past decade, which comprised both an up cycle and a down cycle, the average annual capital appreciation for residential and commercial properties across locations has been roughly 6 to 7%, said Knight Franks Ratti. That is close to the inflation level plus 1%. Add rental income

to it and the total annual returns from REITs since their introduction have been over 10%. That is also probably why some position commercial real estate investments between high-risk equity and low-risk debt. When an investor adds such properties to their portfolio, as personal finance plans Raghav noted, the need for fixed income automatically goes down. For others like Kavita Menin of Probitiz Wealth, a Mumbai-based investment advisory firm, commercial property investments are like inflation hedge bonds. If I bought a reed with a rental yield of 5%, this itself should grow every year by 5 to 6% with the agreed rent escalations and the lease running for years. She said, with hikes and rent, the property's capital value should adjust upwards so that the

yield stays in the 5 to 7% range menon added. That said, higher returns are not the only advantage of commercial properties. Ease of operation without active engagement, as Rati put it, and a higher regulatory safety net in many options add to their appeal. Climbing the property risk ladder. Of all the investment options in commercial real estate, Rati believes reeds are the most evolved. For one, they are listed on the stock exchanges. India currently has five listed reeds.

Embassy office parks, mine space business parks, Brookfield India Real Estate Trust, knowledge realty trust and Nexus Select Trust. While most of them focus on high-grade office space, Nexus is retail space. space oriented. Now, reeds are required to invest at least 80% of their assets in completed rent-generating properties. They pool investor funds to purchase and operate portfolios of properties, typically commercial real estate, such as office parks and shopping centers. Nearly two-thirds of reeds in India are reportedly concentrated in Bangalore. They also have to distribute at least 90% of their net distributable cash flows to their unit holders.

That provides liquidity to investors. In the December quarter alone, the five listed reed stocks collectively distributed over $2,450 crore rupees to more than 3,080,000 unit holders, according to Indian Reeds Association. The total gross assets under management of the Indian reed market stand at over 2.5 lakh crore rupees as of December 2025. And because reeds are tightly regulated, their yields tend to be. lower, according to Ratti. Since their IPOs, they have given 5 to 6% returns annually. Over the past

couple of years, rising demand for high-quality commercial and retail spaces, stable rental income, and prudent portfolio management have fueled a strong rally in them, according to a Knight-Frank report. As a result, the total annualized gains and reed stocks have climbed into double digits. While traditional reed assets have to invest at least 500 crore in a property, Sebi, in early 2024, introduced small and micro reeds, SM REITs, which are allowed a smaller ticket size of 50 to 500 crore rupees. They are also listed and tightly regulated, but they come with a higher risk of investing in a single property, unlike traditional REITs which invest in multiple assets.

That's also probably why the regulator has mandated a minimum investment of 10 lakh rupees into SM REITs, effectively keeping them out. out of reach for smaller retail investors. Probituss's menon said that she'd take a wait-and-watch approach until the product has a developed track record. But there are some safer aspects too. For instance, unlike traditional reeds, which can invest up to 20% of their capital in under-construction assets, SM REITs are not allowed that option.

Related party transactions do are not permitted. SM REITs are sebi-regulated versions of the earlier fractional investing in real estate, said Abimanyu Aurora, an associate director at HBits, an SM REITS provider that plans to launch its schemes this year. The company he said is aiming to manage assets worth 2,500 crore rupees in one year and quadruple it in five years. As it stands, just one other company, Alt, formerly called property share, has launched SM READ schemes. It has projected a yield of 8 to 10% and an internal rate of return of 15 to 8.8. An SM REIT could be considered if it offers something different than a traditional REIT in terms of location or property type.

Else, REITs with no cap on investments can serve the purpose for investors, said Vivek Rati, the National Director of Knight Frank India. Further up, the risk curves are funds offered by AIFs and private equity firms. Asset managers such as ICICI, Nuwama and others offer commercial real estate. exposure to investors who can commit a minimum of one-crow rupees. They usually buy pre-lease properties with blue-chip companies as tenants, offer high-end facilities and manage the property with the help of consultants, said Trigens Jane. Here, the yields are better with 7 to 8% annual escalations. Add capital appreciation to it and an investor could see pre-tax pre-fee returns of 19 to 21% he added.

The caveat, though, is that she could be locked in for multiple years. Direct ownership of commercial properties ranks the highest in the risk-reward pecking order. Here, wealth managers and brokers bring standalone deals that may be suited for high net worth clients, said, Probitrists men, and assets are often pre-leased with a rental yield of 7 to 8% and built-in escalations of 5% to 10%, she added. Typically, the ticket size runs into tens of crores. In Menon's case, they usually fall in the 10 to 50 crore range, and returns are also higher. But there's limited regulatory recourse if things go south. In such transactions and in cases where buyers directly purchase a property and lease it to premium tenants, said Jen, the asset and the deal terms can be customized.

The more complex and customized a deal, the higher the expected returns, he said. As with any investment to each their own in commercial real estate too. Where the bet can go wrong. With all its promise of fixed income like returns, the sector is not without its weak points. Choosing a location is the most basic and underestimated of all. An investor going direct may bet on one pocket of a city expecting it to thrive, but there's always a risk that the city develops in a different area, it's a struggle of personal finance plan dot in.

Even structures like SM reads carry concentration risk. If the tenant exits, it puts a stop to the rental income. finding new tenants, repairing a damaged property, and fighting legal battles with powerful tenants, all of these are not easy for a lay investor. Some even try to mitigate this through longer lock-in periods and bringing in multinational companies as tenants. But the risk of non-occupancy can never be fully eliminated. With Reeds too, there is a risk that the investments in under-construction property could run into

trouble. Sure, Reeds diversify one's portfolio, but hoping that they turn out to be breakout bets is a long shot. As Raghav put it, moonshot returns come with big risks, not with readplays. If you have a tip or a lead for a great story that the Ken can can pursue,

please do send it to Tips at The Ken.com or share it through the form in the show notes of this episode. To find out more about how to do this securely, do read our blog post about sharing tips with the Ken. You will find a link in the show notes as well. Thank you for tuning in and catch you tomorrow.

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