Raheja Mall Office for Sale, Sohna Road Gurgaon

Two units are for sale in this building and their rates are exactly twice apart, in the direction you would not expect. An office of 740 sq ft is asked at Rs 1.1 crore, which is Rs 14,865 per sq ft. A retail shop of 1,350 sq ft on the second floor is asked at Rs 1 crore, which is Rs 7,407 per sq ft.

Retail is supposed to be dearer than office. Here the office is worth twice the shop, and the reason is not the market. It is the floor.

At a glance

Why an upper-floor shop is the cheapest thing in a mall

Shoppers arrive at the ground floor and thin out on the way up. A ground-floor shop in a working mall has footfall it does not have to earn; a second-floor shop has whatever the anchor tenants and the food court drag upstairs, and in a mall that has not become a destination the answer is not much.

So the Rs 7,407 is not a discount on a shop. It is the price of a unit whose retail use may never work, and whose value therefore rests on being let as something else — an office, a clinic, a training centre, a back office. This research found precisely the same shape at Omaxe Gurgaon Mall in Sector 49, where one building lets at Rs 33 and Rs 70 per sq ft depending only on the floor.

The instruction that follows is the same in every mall in this batch: ask which floor before you ask the price, and when a mall unit looks cheap, find out whether you are buying a bargain or a vacancy.

What the office rate implies, and why it is thin

Rs 14,865 per sq ft for a 740 sq ft suite has to be set against what the same corridor lets at. The letting side of this building publishes no rent at all, and the two corridor quotes we could find are stated on carpet area, which converts to roughly a third less on a chargeable basis. Expect Rs 40 to Rs 60 per sq ft a month chargeable on Sohna Road.

Read that table carefully, because it says two things at once. The office at Rs 14,865 produces three to five per cent gross — below a fixed deposit, before maintenance, before vacancy. And the shop at Rs 7,407 produces six to ten per cent, if it lets. The whole question is that if.

The number that decides it: does the unit let at all?

Everywhere else in this batch, a yield calculation starts from a published rent. Here it cannot, because nobody publishes one for this building. That absence is itself the most useful fact on the page.

Buildings with active letting markets have published rents, because agents compete to advertise them. A building with units for sale and no rent in circulation is a building where letting is slow. So before any offer here, the questions are not about the rate:

• Is the specific unit let today? To whom, at what rent per sq ft, on what unexpired term?
• How many units in the building are vacant, and how long have they been vacant?
• What did the last three lettings in this building actually achieve, on a chargeable basis?
• What does the owners' association charge, and what does an empty unit still owe it?

A vacant unit in a slow building is not an asset earning nothing. It is a liability paying maintenance, and on a Rs 1 crore purchase a year of that is real money.

Carpet, chargeable, and a third of the rate

The corridor quotes here are stated on carpet area. That matters more on Sohna Road than almost anywhere, because the difference is large enough to reverse a decision.

A rate of Rs 60 per sq ft on carpet, at the 35 to 40 per cent loading buildings of this vintage commonly carry, is roughly Rs 40 to Rs 44 on a chargeable basis. If you underwrite a purchase at Rs 60 chargeable when the market pays Rs 60 carpet, you have overstated your income by about a third, and a four per cent yield becomes closer to two and a half.

So get the basis in writing, for the rent and for the price, and do both divisions yourself. This is the single most common way a commercial purchase in Gurugram goes wrong, and it is free to avoid.

What the building is

Raheja Mall is a G+4 building on Sohna Road in Sector 47, with a food court, multi-purpose halls, energy-efficient services, rainwater harvesting and managed waste disposal. It carries both retail and office use, which is why two quite different assets are on sale under one name.

Sohna Road itself is a mid-market office corridor: cheaper than Golf Course Road, cheaper than MG Road, with a tenant base of smaller firms rather than multinationals. That is a defensible place to own something, at the right rate. Rs 14,865 per sq ft on a three to five per cent yield is not obviously that rate.

What to settle before you pay a deposit

• Which floor, and what use is viable on it. Second-floor retail and ground-floor retail are different businesses at half the price.
• Whether the unit is let, and the actual achieved rent per sq ft.
• Carpet or chargeable, for both the rent and the price.
• The building's vacancy, and how long units sit before they let.
• Maintenance, and what a vacant unit costs you a month.

Frequently asked questions

What does office space cost to buy in Raheja Mall, Sohna Road Gurgaon?

One office of 740 sq ft is asked at Rs 1.1 crore, which is Rs 14,865 per sq ft. Separately a 1,350 sq ft retail shop on the second floor is asked at Rs 1 crore, which is Rs 7,407 per sq ft. Both are asking prices rather than registered transactions, and the two are exactly twice apart.

Why is the shop cheaper than the office in the same building?

Because of the floor. Footfall arrives at the ground level and thins going up, so a second-floor shop in a mall that has not become a destination has little retail value and is really being valued as space that might be let for some other use. This batch found the same pattern at Omaxe Gurgaon Mall, where one building lets at Rs 33 and Rs 70 per sq ft depending only on the floor.

What rental yield would these produce?

Sohna Road office space runs at roughly Rs 40 to Rs 60 per sq ft a month on a chargeable basis. That gives the Rs 14,865 office a gross yield of about 3.2 to 4.8 per cent, which is below a fixed deposit before maintenance and vacancy, and the Rs 7,407 shop about 6.5 to 9.7 per cent if it lets at the same rate. Whether it lets at all is the real question.

Why is no rent published for this building?

That absence is information. Agents advertise rents where letting is competitive, so a building with units for sale and no rent in circulation is usually one where letting is slow. Before offering, ask how many units are vacant, how long they have been vacant, and what the last three lettings achieved on a chargeable basis.

What is the difference between carpet and chargeable area here?

Buildings of this vintage commonly load 35 to 40 per cent onto carpet area to reach chargeable area, so Rs 60 per sq ft on carpet is roughly Rs 40 to Rs 44 chargeable. Underwrite a purchase using a carpet rent against a chargeable area and you overstate your income by about a third, which turns a four per cent yield into something closer to two and a half.

Is Sohna Road a good place to own an office?

At the right rate, yes: it is a mid-market corridor, cheaper than Golf Course Road or MG Road, let to smaller firms rather than multinationals, in a G+4 building with a food court and multi-purpose halls. At Rs 14,865 per sq ft producing three to five per cent gross, the rate is doing none of the work, and the negotiation has to start from the achieved rent rather than from the asking price.