Typically SCO, they are 2-5 story buildings with the retail section housed on the lower floors, i.e., the ground floor and sometimes the basement, and the office The commercial property market in Gurgaon has consistently ranked amongst the very best SCO in the country over the past few decades. Emerging as a key player, its growth has been driven primarily by the dominant IT/ITeS sector, the influx of global corporate powerhouses, tremendous infrastructure upgrades, and government policies that are on point.
Accordingly, there are numerous attractive investment opportunities available in Gurugram’s commercial realty market and SCOs or Shop-Cum-Offices have emerged as one of the best-performing asset classes. In this article, we will take a look at everything you need to know about this exciting new property type and the essential factors to keep in mind while investing in SCOs in Gurgaon.
Table of Contents –
1. What are SCO Properties?
2. Factors That Have Led to the Growth of SCO Properties in Gurgaon.
A. Fundamental Drivers of Growth.
B. Market-Driven Drivers of Growth.
C. Other Factors.
3. Benefits of Investing in SCO Properties in Gurgaon.
4. Factors to Consider While Investing in SCO Properties in Gurgaon.
1. Location.
2. Future Developments.
3. Legal and Compliance.
4. Size, Layout, and Amenities of the SCO Plot.
5. Rental Income Potential.
6. Investment Budgeting and Financing.
7. Developer Credibility.
8. Market Conditions and Economic Factors.
9. Exit Strategy.
1. What are SCO Properties?
SCOs, i.e., Shop-Cum-Offices, are a unique type of mixed-use commercial property that have the following features –
- They offer a combination of retail and office spaces within the same spaces occupying the upper floors.
- Deployed in prime and strategic locations.
- Designed with the express purpose of maximizing affordability, flexibility in usage, visibility, and footfall.
- Serve to bridge the gap between traditional retail spaces and traditional office spaces.
- Prime examples –
- M3M Urbana in Sector 67
- Vatika City Point in Sector 83.
2. Factors That Have Led to the Growth of SCO Properties in Gurgaon.
The market of SCO properties in Gurgaon has grown tremendously over the past two decades. Given below are the factors that have been instrumental in this expansion –
A. Fundamental Drivers of Growth.
The city’s strategic location, rapid urbanization, infrastructure & connectivity development, favorable government policies such as the Haryana SCO Policy, etc.
B. Market-driven Drivers of Growth.
The effect of the dominant IT/ITeS sector, the presence of numerous MNCs, and the establishment of a thriving entrepreneurship and startup ecosystem, combined with a limited supply of quality commercial spaces and a rising consumer base with higher disposable incomes.
C. Other Factors.
Flexibility, affordability, increasing rental yields and capital appreciation associated with SCOs, growing demand for mixed-use developments, co-working spaces, etc.
3. Benefits of Investing in SCO Properties in Gurgaon.
This Gurgaon SCO investment guide would be incomplete without a section dedicated to the numerous benefits that are exclusive to investing in this compelling asset class.
- Higher rental yields – the combination of retail and office spaces offers typically higher rental income (8-12% p.a.) compared to traditional office spaces (6-8% p.a.).
- Affordability – they usually cost less than standalone office or retail spaces.
- Income stream diversification – as SCOs generate income from both retail and office rentals.
- Higher potential for capital appreciation – SCOs are typically located in prime areas with the best rates of capital appreciation.
- Tax benefits – such as depreciation benefits, lower stamp duties, etc.
- Government Incentives – like relaxed FAR (Floor Area Ratio) norms, simplified approvals, GST input credit, etc.
- Risk mitigation – borne of its diversified tenant base and the associated lower vacancy risk.
- Other benefits – typically located in prime areas ensuring footfall and visibility and offering modern amenities enhancing property value.
4. Factors to Consider While Investing in SCO Properties in Gurgaon.
Although investing in commercial real estate in Gurgaon through SCOs is highly attractive, there are several critical factors that potential investors need to consider.
1. Location.
Easily the most important aspect of any real estate investment, the location of an SCO plot is the most critical factor in determining its success. Being situated in one of the best SCO locations in Gurgaon like Golf Course Road, MG Road, and Golf Course Extension Road, will ensure maximum visibility and footfall. This will in turn increase its appeal for both investors and businesses.
An ideal location would be in the proximity of residential areas, public transportation centers, and major highways like NH-48 and the upcoming Dwarka Expressway. In addition, the presence nearby of malls, hospitals, schools, etc., can further enhance its ability to attract customers.
2. Future Developments.
While established areas offer the best security of returns when it comes to Gurgaon property investment opportunities, new and up-and-coming areas can yield the best returns if slated for significant future developments. For instance, areas adjacent to the Dwarka Expressway and Southern Peripheral Road are gaining prominence due to the upcoming infrastructure projects there.
The most important types of developments to keep an eye on in this regard are infrastructural i.e., metro connectivity, highways, commercial zones, business hubs, etc.
Special mention must be made of the Gurgaon Master Plan 2031 which promises to unleash wide-sweeping effects in The Millennium City. Projects and initiatives undertaken under the ambit of this master scheme will catalyze the next sea wave of developments that could make or break your investments.
3. Legal and Compliance.
Legal compliance for SCO investments is often overlooked by investors due to several reasons – a focus on financial aspects, overreliance on developers/brokers, lack of expertise, etc. This can have some very serious consequences i.e., financial penalties, loss of reputation, legal disputes, and even loss of investment.
It is, therefore, critical to ensure that all legal documents and approvals are in order. While it is beyond the scope of this article to provide a comprehensive list, here are some of the most important legal papers and compliances an investor must verify when purchasing an SCO in Gurgaon –
- Project registration with Haryana Real Estate Registration Authority (HRERA).
- Title deed, sale deed, conveyance deed, possession certificate, completion certificate, occupancy certificate, etc.
- Approvals for building and layout plans, compliance with local zoning regulations, environmental regulations, building codes, various NOCs, etc.
- GST, stamp duty, registration fees, compliance with the Haryana Shops and Establishments Act, etc.
Needless to say, it is advisable to enlist the services of a legal professional in this regard.
4. Size, Layout, and Amenities of the SCO Plot.
The size and layout of SCO units in Gurgaon play a vital role in its success and profitability as an investment. Catering to the diverse needs of both retail and office spaces, a large, efficient, and flexible unit is of the essence.
Larger SCO plots offer enhanced attributes of –
- Efficiency – in use of space to better accommodate multiple units or businesses.
- Flexibility – in design and layout to better enable adaptation to changing SCO real estate trends in Gurgaon.
- Visibility – to attract more customers.
- Scalability – to allow for future expansion and development.
A well-designed layout helps further augment the above-mentioned aspects, in addition to, efficient circulation facilitating the smooth movement of customers and employees, and of course, good aesthetics for better overall appeal.
The competition in The Millennium City is fierce, and SCOs that offer ample parking space and other amenities such as food courts, smart building technologies, high-end conference facilities, etc., will have a sharp competitive edge.
5. Rental Income Potential.
One of the highest rental yields in Gurgaon commercial properties is from SCOs. However, investors need to know that rental income is largely determined by the demand strength of the local market.
Areas near well-established commercial centers, malls, or corporate offices will have better access to potential consumers. Additionally, the presence of MNCs, startups, and established retail brands in the vicinity, would greatly bolster the SCO’s ability to attract top-of-the-line clients.
It is, therefore, imperative to undertake proper market research to have a proper understanding of relevant aspects of the local market i.e., vacancy rates, rental prices, and future demand projections.
Furthermore, it is considered wise to engage the services of property management professionals in this regard.
6. Investment Budgeting and Financing.
It is imperative to have a well-rounded and calculated investment strategy in place when acquiring SCO properties in Gurgaon i.e., clearly defined financial goals and limits of risk tolerance, resource allocation, cash flow management, and contingency plans for risk mitigation.
Additionally, when considering financing the following key aspects should be kept in mind –
- Exploring financing options – such as bank loans, mortgage financing, private funding, joint ventures, etc.
- Financing terms and conditions – interest rates, loan tenures, Loan-to-Value (LTV) ratio, Debt Service Coverage Ratio (DSCR), prepayment penalties, etc.
- Hidden costs – such as processing fees, stamp duty, registration, taxes, insurance, maintenance charges, repair costs, etc.
SCO real estate trends in Gurgaon indicate that while prime locations like Cyber City and Golf Course Road are undeniably more expensive but offer better returns, emerging areas like New Gurgaon, Sector 114, Sector 88, etc., require a lower initial investment but have a longer investment maturity period.
Again, consider seeking professional financial assistance for the best results.
7. Developer Credibility.
One of the best and easiest ways to guarantee the success of your investment is to deal with the best developers for SCO properties in Gurgaon.
A developer with a solid reputation is most likely to ensure a high quality of construction, regulatory compliance, adequate maintenance, after-sales support, and timely delivery. Not to mention the fact that such projects have excellent resale value.
To accurately gauge the competency and credibility of a developer consider key indicators like –
- Certifications like RERA, ISO, OHSAS, IGBC, LEE, etc.
- Membership in professional associations, such as CREDAI, NAREDCO, ASSOCHAM, FICCI, etc.
- Government licenses such as HUDA License, DTCP approval, Ministry of Corporate Affairs registration, etc.
- The quality and timeline of past projects.
- Feedback from previous customers.
- Awards and recognitions.
- Financial health and stability.
- Transparency.
Lastly, visiting previous projects executed by the developer can be an excellent method of assessing their abilities.
8. Market Conditions and Economic Factors.
All investments are influenced by broader economic conditions and SCO investment opportunities in Gurgaon are no exception to this rule.
Some of the most important market conditions to keep in mind are –
- Supply and demand dynamics – which have a direct correlation with rental income and property values.
- Interest rates – which exert an influence on borrowing costs and rates of investment.
- Inflation – which impacts construction costs, rental income, property value, etc.
- GDP growth/stagnation/contraction – which affects overall demand for commercial spaces.
- Government policies – such as regulatory changes, tax laws, and infrastructure developments.
Additionally, economic factors such as low unemployment rates, strong consumer spending, supportive national demographics and global economic trends, and a positive overall business environment facilitating the ease of doing business, are all positive signs.
Specifically in Gurgaon, the performance of the IT/ITeS sector and initiatives of the Haryana government should be kept in mind as well.
9. Exit Strategy.
Lastly, one of the most important components of risk management for commercial real estate is to have an exit strategy to help you get the best ROI possible.
Regardless of whether you are looking to sell or rent at the outset, it is crucial to have a set of parameters that will indicate the right time to divest. Liquidating an investment in a commercial property can often take longer and become more complicated than it may seem at first sight.
Best practices in this regard include keeping yourself abreast of current and forecasted property values in the market and adjusting strategies as required. Also, professional advice would not hurt.
Conclusion –
Shop-Cum-Office spaces in Gurgaon are undoubtedly one of the top asset classes in the city’s real estate market and investing in them has several benefits exclusive to the property type. There are several important factors that investors should consider such as the project’s location, size, layout, rental potential, and developer reputation. The projected developments in the vicinity, legal considerations, investment, and exit strategy are also to be kept in mind.
As investing in SCOs in Gurgaon can clearly get highly complicated and intensive, it is strongly recommended to seek the help of real estate professionals. Consider Laveek Estates, a real estate consultancy firm with over 14 years of experience in the market, an impeccable track record, and a commitment to transparency and personalized service.
