The commercial real estate asset class in India has become one of the favoured investment avenues for global institutional investors, often referred to as the “Blue Eyed Boy” of private equity funds. Commercial real estate is one of the asset classes that is closely correlated to the underlying country macro-conditions – considering the Indian Growth Story, the returns have been commensurate presenting a compelling risk-adjusted investment proposition. Through innovation and technology, this asset class has largely been democratised, providing retail investors with unprecedented access. Alternative Investments: A Brief Historical Context Alternative investments, once the domain of UHNIs (Ultra High Net-Worth Individuals) and institutional elites, have increasingly seen increasing participation and market share from retail investors and high salaried professionals. After significant market crashes like the 2008 housing crisis, tech bubble crash, and COVID-19 crash, the value and importance of alternative investments becomes clearer. These events underscore the need for diversification beyond traditional assets. Alternative investments offer non-correlation, stable returns, potential for alpha, and serve as an effective hedge against inflation. Also Read: Top 10 tax-saving investment schemes for long-term growth This trend is not only confined to India, but can be seen on a larger global platform. The Blackrock Report indicates a global uptick: from just 5% in 1995, alternative investments grew to 26.0% by 2019. Tech-driven platforms have democratised access to these assets in the past decade, allowing more average individuals to participate. Supporting this, SEBI reports from December 2021 showed alternative investment funds growing by 38%, reaching over 6 lakh crores, outpacing Mutual Funds’ 22% growth in comparison to last year. Why Consider Alternative Investments in CRE? Investors in India are exploring alternatives to equity markets and FDs due to diversification benefits, potential for higher returns, low FD interest rates, market volatility, and long-term growth prospects. Regulatory support, innovation in investment platforms, and global trends in favor of alternatives are also driving this shift. India’s diverse demographic and favourable economic fundamentals make CRE an attractive asset class and alternative investment avenue. Here’s why: Diversification: Alternative CRE investments bring diversity to an investor’s portfolio, acting as a hedge against traditional real estate market downturns. For instance, during the 2008 global financial crisis, alternative CRE investments experienced relatively lower declines compared to mainstream real estate, though precise figures require further verification. Rising Demand:The evolving work culture in India has spurred demand for flexible office spaces. Across the top seven cities, operational flexible office stock has surged to over 53 million sq ft, marking a substantial 75% growth from pre-pandemic levels of about 30.3 million sq ft. Similarly, the booming consumer demand and increased investments in manufacturing have propelled warehousing into a high-growth real estate asset class. Projections suggest that India’s warehousing supply will expand from 344 million sq ft in 2023 to approximately 516 million sq ft by 2026. Potential Returns:Alternative CRE investments frequently offer higher yields, especially when entering the market at opportune times. Based on historical data, the internal rate of return (IRR) for alternative CRE investments typically ranges between 12% and 17%. What is important to understand in the terrain before investing? Before diving into the intricate waters of CRE investments, familiarise yourself with the basics: Asset Types: CRE isn’t a monolith. It encompasses a diverse array of assets ranging from office spaces, warehouses, datacentres to specialised retail spaces. Understanding the nuances and potentials of each type can significantly influence investment decisions. Market Dynamics: Like all real estate, CRE is influenced by location-specific socio-economic factors. Research the regional growth indicators, infrastructure developments, and urbanisation trends that can impact the asset’s value. Developer and Building Credibility: Before investing, assess the developer’s reputation. Quality infrastructure and amenities can draw blue-chip tenants, enhancing the asset’s appeal and potential for sustained rental income. Liquidity Considerations: CRE investments may have longer lock-in periods. Understand the lock-in period and Assess your financial situation to ensure you’re comfortable with the liquidity terms before committing. Seek Expertise: Especially for first time investors, consulting with financial advisors or those seasoned in the CRE space can be invaluable. They can provide insights, warn of potential pitfalls, and guide investment strategies. How The Digital Gateway is Enabling CRE Investment? Innovative Tech-driven Digital platforms have disrupted the status-quo by enabling fractional ownership in curated CRE assets across India. However, choosing the right platform requires vigilance and careful evaluation: Reputation and Credibility: Prioritise platforms with a proven track record. Look for user reviews, ratings, and any awards or recognitions the platform might have received. Additionally, consider the platform’s history of exits – instances where investors have successfully liquidated their investments, indicating a realised return on investment. Transparency: Opt for platforms that provide detailed insights into the properties, including location, tenant details, valuation reports, due diligence documents and more. A transparent platform often indicates reliability. Fees and Charges: Every platform will have a cost structure. It’s imperative to understand the associated fees – be it management, transaction, or any hidden costs. Always ensure that the fee structure is aligned with your returns. Complaint Readdressal: Ensure the platform has a robust and responsive system for handling investor grievances and complaints. A swift and effective redressal mechanism can be an indicator of the platform’s commitment to its users and its overall credibility. This addition helps potential investors understand the importance of choosing platforms that value user feedback and have systems in place to address concerns. How to Stay Updated with CRE World? The world of CRE, like all investment domains, evolves: Continuous Learning: Regularly update yourself on market trends, emerging sectors within CRE, and macroeconomic factors that can influence the real estate space. Engage with a Community: Join investor forums, attend seminars, or engage in online communities. Networking can provide firsthand experiences, tips, and updates. Conclusion Venturing into the CRE space as a first-time investor is akin to navigating a vast ocean. While the waters are rich with potential treasures, they also harbour challenges. The digital age has simplified the journey, but it’s imperative to always do thorough research, due diligence, and engage professionals/domain experts to help navigate. (By Aryaman Vir, CEO, Aurum WiseX) Disclaimer: This is the author’s personal opinion. Readers are advised to consult their financial planner before making any investment. 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