Investment tips for NRIs for commercial property in India


Non Resident Indians (NRIs) are looking at investment opportunities in Indian property market today, though the task is quite challenging. However, with the rupee sliding against the dollar, this is a great time to remit funds to India for investment. On the other hand, with India’s growth story looking dreary, the prospect for high returns seems an uphill task. Here’s an option that might be considered by those Non Resident Indians with big budgets, who have the appetite for some serious real estate investing.

 

“If you are eagerly looking at investing in property in India, considering commercial spaces would be a suggested move. NRI’s today are buying commercial properties for investment. HNIs also continue to plough huge amounts of money into high-ticket commercial properties in the quest for quick yield. Wealth management firms and Private bankers confirm that their clients have actively started investing in commercial properties. These investors have bought into commercial properties because they seek assets that can protect their portfolios from stock market volatility and inflation,” says Ajay Dabas, Director, Certes Realty Ltd.


So here are some tips that might help you if you are looking for commercial property.
•    Investors need to establish the soundness of the location and its demand or supply dynamics. If sufficient research is not undertaken by them, they may end up buying into micro markets which have or will have high vacancies. NRIs must ensure that the job market, economy and population growth in the market is healthy.
•    For commercial purpose – Bangalore and Mumbai offer the best investment opportunities.
•    There are different kinds of commercial properties that are available such as retail and office spaces. Few years ago, only large units were available for retail and office spaces, creating difficulty in investment purpose for small investors. However, there has been a change and smaller spaces are becoming available.
•    Many developers, especially in cities, are today offering smaller units of space (as small as 500-1,500 square feet). Investors looking at retail space can now consider a multitude of affordable options in free-standing high street outlets or shops in malls.
•    If you are looking for retail space, then it is advisable to look at high street rather than a mall, as, strata sold mall is meant for a catastrophe. In a strata sale model, shops in a mall are pre-sold to individual investors. Developer thus restricts himself to selling a store as a unit and investor can hunt for a tenant. The main problem arises as the model has no control over trade and tenant mix and there is no cohesiveness to the mall to attract customers.

 

Often, buyers tend to ignore rental yield and instead focus only on capital appreciation. Rental yield is nothing but the annual rent divided by the property value which is a very important parameter as it represents productivity of the price. While buying a commercial property, you have to make sure that you can get a rental yield of at least 11-12%.  Rental yield of less than that means the property is overvalued.

Capitalization rate is actually the measure of the demand for the property. For those who do their homework well, investing in commercial properties is a high-returns and high-adrenaline game. Like any other property purchase, commercial real estate investing too, requires a fair share of due diligence. Check the developer’s credentials, access to public transport, potential for infrastructure development and quality of property management in the project. If you are an investor looking at an income producing office asset, then look at the break-up of cash flows, expenses such as maintenance, the vacancy factor, building insurance, property tax, long-term capital appreciation potential, lease term, the lock-in period and its expiry dates, refinancing, refurbishment and repositioning potential.

 



© 2017 Certes Realty | All Right Reserved
Contact # 9015-330-330 | Powered by: Catabatic Automation Technology
Protected by Copyscape Online Copyright Protection