Where cap rates sit
Institutional-grade pre-leased Grade A stock in BKC/Nariman Point trades at 7.2–7.6%. Peninsula/Andheri East runs 7.8–8.2%. Non-Grade-A or single-tenant assets stretch to 8.5–9.2% with materially higher execution risk.
What to check
Lock-in structure, escalation clause (9%/3 years is market), tenant covenant strength, security deposit multiple, and — critically — the exit assumption. Refinance quality of the asset in year 5 determines your IRR more than year-1 yield.
The rental-reversion play
Assets leased in FY22–23 at rents well below current market are the most interesting today. On escalation and re-lease, IRR of 14–16% is achievable — significantly above current cap-rate yields.
Key takeaways
- 7.2–8.5% cap-rate band for institutional-quality assets
- Rental-reversion plays offer the best risk-adjusted IRR today
- Tenant covenant and refinance-ability drive exit value