Go for investment in commercial property
Please share your view points oninvestment in Commercial property viz a viz in residential property in India
Buying an office or retail space is a huge investment, which is why commercial real estate has been traditionally seen as an asset class that only institutional investors or heavyweight HNIs could invest in. That, however, is changing. Many retail investors are now getting into the office real estate game.
Investing in commercial real estate requires forethought, research and planning: • Investors need to establish the soundness of the location and its demand/supply dynamics. • Ensure that the economy, job market, future infrastructure development and population growth in the market is healthy
• Check the developer creden
• Check the access to public
• Check the quality of property
management in the project When investing in a retail store, one should consider the frontage, foot-fall and the dynamics of the ad joining catchment. Entrepreneurs who wish to buy commercial real estate for self-use should ensure that the amenities in the project that match their business needs.If an investor is looking at an income producing office asset, he should look at: The break- up of cash flows, The vacancy factor, Expenses such as maintenance, property tax and building insurance,Lease term, lock-in period and expiry dates,Long term capital appreciation potential, Refurbishment, refinancing and repositioning potential.
In India, the yields in commercial real estate are one of the highest in the world. While yields from residential proper- ties are between 3-4 per cent, in case of commercial properties it is around 8 per cent, and can even go up to as much as 10 per cent in some areas.
Yields in commercial real estate are always better than residential real estate.If you are looking for decent rental income to support your passive income and avail wealth tax exemption, then commercial real estate fits the bill. However, capital appreciation in the value of real estate is still much higher in residential real estate owing to pent up demand.
Investment in commercial property invariably involves a much higher financial outlay than residential, and one also needs to choose the location far more carefully. While residential property tends to find buyers or tenants in most locations that offer sufficient transport and social infrastructure, commercial real estate investment must be finely focused on high-demand locations.
You do not only make a profit on the sale of appreciated commercial property – the rental cash flows of a well-located office or shop space are considerable. Unlike in residential property, the income that can be generated from commercial property is what determines its value.
In other words, the capitalization rate is actually the measure of the demand for the property. For those who do their homework well, investing in commercial property is a high-adrenaline and high-returns game that residential real estate investment cannot hold a candle to.
UNLIKE IN RESIDENTIAL PROPERTY, THE INCOME GENERATED FROM COMMERCIAL PROPERTY DETERMINES ITS VALUE
Niti Saxena, president, sales and marketing, Appu Ghar