Niche property assets are attractive, with high yields
For a long time, the property market was considered one of the most profitable, but with the rise in interest rates, the situation began to change. Many investors have started to look for other ways to generate income, but some are not afraid to take risks. The latter have turned their attention to niche real estate assets, investments that involve high risk but can generate good returns. One investor who is not afraid of a challenge is Vivek Oberoi.
As well as being a successful entrepreneur in India, Oberoi is also a Bollywood movie star. His new property venture is a luxury resort on the banks of the Ganges. Vivek has recruited two other local businessmen to build the resort and has raised USD 40 million of the USD 160 million required. Investing in such projects is riskier than investing in commercial or retail property. However, Oberoi plans to profit much more from the resort than from offices and apartments.
Vivek chooses niches that can generate above-average returns in the market. One such project has been the construction of low-income housing. The investment has yielded a return of 20% per annum, which is excellent for the market. Oberoi has now focused on the wellness and eco-travel sectors, which have become extremely popular with locals and foreigners alike. The trend in the market is luxury, the demand for which is increasing, which means bringing good money. Commercial properties and warehouses are lucrative niches besides the premium hospitality sector.
Challenges facing the global property market
The global real estate market is going through challenging times due to rising interest rates and a slowing economy. As a result, there is instability in the office sector and lower forecasts for the retail industry. All of this is causing investors to be extremely cautious about new projects. According to Knight Frank, the market is showing volatility:
– in 2023, the volume of global investment in real estate will decline by 21% to USD 1.12 trillion;
– pension funds reduced the share of real estate in their investment portfolios by 28% to USD 440 billion;
– the share of the property market held by endowments and foundations fell by 29% to USD 222 billion;
– private investors reduced their assets by 8% to USD 455 billion.
Knight Frank notes that this distribution is the first time in the market that wealthy individuals have invested more in property than foundations and trusts. This group of investors poured USD 195 billion into the residential sector, the highest in the last 10 years. Like Vivek Oberoi, businessmen worldwide opt for high-return assets, even if they come with risks.