Real estate investing has always remained a hotspot for investors, especially for seasoned investors. It acts as a safe spot to park your funds, and you can expect moderate to good returns through real estate investing.
However, even in real estate investing, you have multiple options to go ahead with. Amongst these, commercial real estate investing is witnessing a spike in investments. Let’s understand the intricacies of commercial real estate investment and the investment strategies you can employ to build wealth.
What is Commercial Real Estate Investing?
As the name suggests, commercial real estate investment involves investing in commercial real estate properties. These can involve investments in commercial lands, shops, factories, offices etc. The cost and growth rate of commercial properties are more as compared to real estate properties.
Commercial Real Estate Investment Strategies
Here are some of the key strategies you can employ in commercial real estate investments in India to build wealth:
1) Location Centric Investments
When selecting to invest in commercial real estate India, location plays an important role. If you target prime locations in your city, in metropolitan cities, business-centric locations, commercial hubs etc., then you can witness a good growth in your property value in the future.
Further, investing in a location where a future development project can be carried out can be a great booster for your commercial property value. This can include a highway, a metro project, a major business hub, an airport etc.
2) Investment for Rental
While investing in commercial real estate for capital appreciation is one thing, it is worth noting that commercial real estate properties also provide high rental yield. Therefore, investing in commercial real estate can be a good strategy if you wish to generate a good passive income. Once your investment goal is achieved, you need funds or the value of your property achieved good growth, you can consider selling it to book capital appreciation.
3) Invest in REITs
You can consider investing in Real Estate Investment Trusts (REITs) if you don’t wish to invest huge capital in commercial real estate properties. REITs are investment vehicles that pool money from investors and invest in the real estate sector. If you don’t have much capital, then REITs are a viable option to invest in the real estate sector.
4) Land Investment
Land is a limited asset and therefore, its value will rise in most cases. Investing in land in the commercial area can be a boon for your wealth in the future. You can later sell this land to a developer or build your own project on this land. You can even lease this land against fixed lease rental.
5) Factory/Warehouse Purchase
If you buy a factory or warehouse, then it can be a good source of passive income for you. Many companies, especially e-commerce companies, need warehouses to store their goods and products. The rental income is quite good. Also, as you own the land, it can be a great source of wealth generation for your business.
Benefits of Commercial Real Estate Investments
Following are some of the lucrative benefits of commercial real estate investments in India:
Stable Income Streams: Commercial properties such as office spaces, retail outlets and industrial units often generate stable and predictable rental income. Long-term lease agreements with established businesses provide a consistent cash flow for investors.
High Return Potential: While commercial real estate may require a higher initial investment compared to residential properties, it often provides higher returns. Prime locations in major cities and strategic investment choices can result in significant capital appreciation over time. Further, the rental yield is also quite high as compared to residential real estate.
Diversification of Portfolio: Another benefit of commercial real estate investment is portfolio diversification. Diversifying investments across different types of commercial properties such as office spaces, warehouses, retail shops and industrial properties can help mitigate risks associated with economic fluctuations.
Growing Demand in Urban Centres: The rapid urbanisation in India, especially in major metropolitan areas, has led to an increasing demand for commercial spaces. As businesses expand and entrepreneurs establish new ventures, the demand for office spaces and retail properties continues to rise.
Government Initiatives and FDI Inflows: Government initiatives such as Make in India, Smart Cities and favourable policies have positively impacted the commercial real estate sector. Additionally, increased foreign direct investment (FDI) in the real estate market contributes to its growth and attractiveness for investors.
Infrastructure Development: Ongoing infrastructure development projects like the expansion of transportation networks, the creation of business parks, the development of metros, bullet train projects etc. enhance the overall value of commercial properties. Investments in areas with planned infrastructure improvements can yield substantial returns as they directly increase the investment value.
Adaptive Reuse Opportunities: The flexibility of business real estate investment properties allows for adaptive reuse or redevelopment, providing investors with opportunities to revitalize underutilised spaces. This approach can cater to changing market demands and maximise the property's potential.
Technology and Innovation Hubs: Investing in commercial real estate in technology hubs like Bangalore and Hyderabad can be particularly lucrative. The booming IT sector drives demand for modern office spaces, making these locations attractive for long-term investments.
Lease Structuring Benefits: Commercial leases often offer more flexibility in terms of lease structuring. Investors can negotiate lease terms, escalations and other provisions that provide greater control over the income generated from the property.
Inflation Hedge: Real estate, including commercial properties, can serve as a hedge against inflation. As the cost of living increases, so do property values and rental incomes. This helps investors maintain the purchasing power of their wealth.
Global Economic Connectivity: With the increasing integration of the Indian economy into the global market, commercial real estate investments are likely to benefit greatly from international business expansions, global partnerships and cross-border trade.
In a Nutshell
Commercial real estate investment in India is gaining momentum. India, being a developing country, offers great scope and opportunity to increase wealth and therefore, has become an attractive investment destination not only for Indians but for foreign investors as well. With rapid development and infrastructure projects being carried out, the value of properties is expected to rise in the future.
If you are looking to invest in commercial real estate in India, whether for your own use or investment but lack funds, you can go for TATA Capital Business Loan. With attractive interest rates, flexible tenures and zero collateral requirements, these can be a catalyst for your growth and investment. Apply for TATA Capital Business Loan now!
05 January 2024
6 mins read
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