Commercial property investment can be risk averse as compared to residential property when it comes to generating higher rate of return. One of the most important criteria when it comes to investing in commercial spaces is to think about the long term and plan your investment accordingly. However, investing and choosing from the wide array of options available for investing isn’t easy and requires constant assessment and analysis.
One can also assess following questions to zero in on the type of investment portfolio they want to invest in easily-
- Do you know the amenities you want with the property you are investing in?
- Do you have a timescale in mind when it comes to investing?
- Is the location of the investment fruitful in terms of invested capital?
Depending upon the knowledge, expertise and financial capability of an individual one can invest in a property. This not only helps in giving a clear sense of understanding but also helps in understanding the impact of your investment.
Brood over the following characteristics before investing in a commercial space:
Economic Elements
Macroeconomic factors such as financial crises and global conflicts play a pivotal role when it comes to commercial estate investment in India. The real market driver when it comes to investment is economic conditions. Government policies in confluence with economic conditions present in the market, run the demand for property. Commercial real estate is often considered insulated against such uncertain shocks that jolt the market predictability.
Impact of Economic Elements
With rising demand for commercial spaces in the form of co-working spaces, cloud kitchen spaces, smart offices and retail shops it becomes necessary to keep a sharp eye on government regulations. It also becomes necessary to understand the real-time dynamics of the business you are getting involved in, especially in the case of commercial business. ‘Atamnirbhar Bharat’ has only led to an influx of investments in the country but has also given tremendous boost and laxation when it comes to investment.
Green Surrounding Leads To Green Accounting
Emerging economies are emphasising on increased use of green concepts when it comes to eco-friendly development. There has been an upsurge in demand for the increased use of energy-efficient systems, renewable resources, rainwater harvesting and waste management. Real estate developers are laying strong emphasis on certifications in construction to reduce carbon emissions. The real estate industry is currently contributing to 40% of the current greenhouse gas emissions, resulting in the lookout for replacement in the construction raw materials.
Bhutani’s effort to Go Green
Builders like Bhutani are exploring the plethora of strategies that can help in minimising the need for energy use in buildings for cooling and heating. It is all about the responsibility that the real estate industries hold to reach climate and environmental sustainability targets. Green buildings are bound to take up a significant share of global projects, which is expected to climb high further. Investments in eco-friendly environments are likely to pay off in the long term. With that in mind, Bhutani Cyberthum is going to plant 1000 trees on its premises. This is not only a huge step towards sustainability but also a humongous step to inspire green development in India.
Effective Return On Investment
With the purpose of monetising rent-yielding assets, REIT has proven to be an effective way of getting better capitalisation rates and reducing high-level debts. This development has instilled transparency and liquidity in the real estate marketplace in India. This is clearly visible in all the small areas on the industrial corridor. The TIER-II and TIER-III cities are enjoying the fruits of such infrastructure. For the most part, REIT returns and interest rates have a direct affirmative correlation. However, interest rates are not necessarily the sole determinant of REITs. With stable cash flow and risk-adjusted returns REITs look attractive in your portfolio.
Amenities as a Plus
A property enjoys loyalty from its customers when it provides numerous amenities to its customers. Electricity and water connections and smooth internet connectivity are essential for any business as well as an individual to thrive. Spacious parking spaces and lifts can upgrade your property to the topmost spot on an investor’s list.
With the rise in demand for improved facilities centred around health and wellness, commercial spaces in India are at the top of the list for investors. As a repercussion, Grade A assets have seen a significant jump in demand infused with making the environment all-inclusive.
Diversify Your Portfolio
According to the Financial Times, commercial property in India is going to surge up to 13% CAGR during the FY 2022-2027. The aftermath of covid resulted in a surge in demand for commercial spaces with increased footfall and explorations. In other words, commercial property is projected to generate 3X more returns than residential real estate in India. Diversification in real estate works on two factors namely time horizon and risk appetite of an individual.
If an individual is looking for a more secure investment then their portfolio might show less risky investment wherein the major stakes can be in the real estate sector. Businessmen and entrepreneurs like to keep their cash in commercial real estate to that they can diversify their portfolios and enjoy the fruit of their interests. India’s real estate market is sprawled across office spaces, retail, hospitality, logistics etc.
Improved Standard of Living
Research shows that large project developments generally uplift the nearby surrounding to cater to new ventures. This not only leads to a greater appreciation of the said property but also uplifts the living standard of the area. This injects the inflow of cash into the microeconomy and also attracts foreign investors to invest in the local economy. All in all the investors end up generating a 6-10% yield in investment and capital returns.
