People seeking high quality life and economic activity will invest in commercial properties. The property market in India is very hot and it is expected that in the year 2020 China will lead the property market, and by 2050, India will overtake China. A commercial property can be bought half constructed, as a full fledged construction or it can be built from scratch. Property investment attracts higher revenue than any other business. So, it is one of the most lucrative businesses.
Main objectives of a commercial property are: maximizing the wealth of shareholders through regular cash flows and regular appreciation, reducing the cost of rent and economic growth.
Benefits of a commercial property are manifold:
Income from Cash Flow/Returns: Choose a property that will produce highest rents and return on your investments faster since there is heavy interest involved on the loan.
Location can go a long way in ensuring success so choose a good location.
Principal of Leverage: Principal of leverage means profiting from the use of other people’s money. Investment in real estate gives that opportunity.
Appreciation: One of the benefits of real estate business is potential for appreciation. But this potential varies from property to property and from location to location.
Things to be kept in mind while choosing a property:
Location: A good location has the ability to run even a lousy business whereas even a good business will fail at a lousy location. Again a wrong location can mar the business prospects. For example: A five star next to an airport or a business centre can attract maximum traffic, in the same way, too many malls in a small town may not guarantee full occupancy.
Multi-tenanted: Investing in multi-tenanted property will ensure that income keeps coming even if one tenant leaves. Therefore one must buy or construct properties that can house multi-tenants.
Nariman Point in Mumbai, India had the distinction of highest commercial real estate rental space in the world in 1995 at $175 per sq ft and regarded as Manhattan of India. And as per a report on “Office Space Across the World 2012”, by Cushman and Weikfield, Nariman Point is the 15th most CBD in the world.
According to Sanjay Dutt, CEO, Business Jones Lang La Salle India, “There are a number of reasons that come to the mind. Firstly, India’s growth story remains intact except for a minor turbulence in the short term. Secondly for the NRIs, there is the straight advantage of exchange rate. Thirdly, property valuations have come down. And lastly, vacancy rates are expected to be high. This will force developers to either lease cheap or sell cheap”.
With reduced rates of properties, and whirring commercial activities, empty offices and malls will fill up, hospital and commercial buildings will sell. This will boost new investments in commercial properties both in terms of construction and in purchase of existing spaces.