In recent times, commercial real estate has become the favorite investment instrument for Resident Indians as well as NRIs. The main reason for such popularity of commercial property could be the high return on investment, ample options to choose from and the recent regularisation of the Indian real estate market in India.
Though commercial property assures greater returns than residential property, it can get overwhelming for the first-time investor. So, if you are investing in commercial property for the first time, here are a few things to keep in mind so that you go in the right direction.
Commercial real estate does not mean just office spaces. There are several other types of investment options such as retail shops, SCO plots, retail spaces in malls, etc. that also count as commercial real estate. Serviced apartments, in fact, are also commercial options. So, when you have made up your mind about investing in this instrument, you should filter out the right type of property. Office spaces and retail spaces would give similar returns. However, the liquidity of the two may differ- retail shops are usually more liquid while office spaces tend to stay unoccupied for a longer time.
Location is the most important part of your real estate investment- whether it is residential or commercial. In fact, the importance of location in a commercial property investment is even higher. You should know that every market is different and every market has its own trend. It is important to look at the kind of property supply in the market, the absorption rate and how the property rates have fared in the previous years. You can also take help of experience real estate professionals or an advisory firm to understand the markets better.
If you are planning to make an investment, it is likely that you have surplus funds. However, you must know whether you are ready to risk your entire savings for this investment. We suggest that you always keep your contingency funds aside and then put the money in any type of investment. Home loans are easily available for commercial real estate as well. Check to see whether you can get a good rate of interest. Knowing the budget will give you a better perspective on how to start your search for the right property.
The government has made the Indian real estate market much more regularised with RERA and REITs. However, as a smart investor, it is your responsibility to check whether the property your are eyeing has all paperwork in place- know whether it is RERA registered or not, do a little background check on the builder (preferably go for a renowned name).
There is no investment in the world that comes without risk. You may have planned the course of your financial life in accordance with your investment. But you must always be prepared for setbacks such as a change in the property’s delivery timeline, regulatory reforms in the market, etc. Being prepared in advance will make it less of a burden on your finacial plans.
Once you start with your search for a commercial property investment, keep the above five things in mind and the process will go smooth.