Commercial properties in the simple term refer to a non-residential property used for business purposes. It includes office spaces, shopping malls, hotels, warehouses, vacant land for potential development in the near future, etc.
Increased income, rapid urbanization and economic growth of the nation have served as the driving factors for the increased demand of commercial property in India. Also, it has become one of the most preferred investment options. The growth in demand is proportionately higher when economic growth of the nation is considered. Due to the increase in FDI (Foreign Direct Investment), there is a tremendous demand for commercial properties and office spaces.
Indian Commercial Real Estate Sector
The investment in commercial properties ranks in the top 5 investment options both in the short and long term. The Indian real estate sector has witnessed visible growth in the past few years and is speculated to grow at a faster pace in the upcoming period. Investors are always in a good position to evaluate the property. If the property is rented, the owner can ask for the income statement of the tenant through which he can calculate the price of the property.
Also, the deterioration rate of rented commercial property is low as compared to rented residential property. As a tenant of commercial property has a vested interest. He will be interested in maintaining the property.
The growth of commercial properties is highly derived through the area in which the property is situated. Location plays an important role in the profits of commercial spaces. As we are close to 2020, the end of the decade would be significant for commercial property investment and is predicted to grow rapidly in the next decade.
Increasing Demand for CRE
The demand for CRE (Commercial Real Estate) is increasing. CRE means a property that is extensively used for conducting business activities. The main profits can come from sole proprietorship businesses. From the investment point of view, investing in commercial property serves the purpose of hedging against the unstable condition of the stock market. Most of the income of the commercial properties’ investment comes from the rents.
Leasing for Long Term
Commercial properties are high-risk, high-reward real estate investment. Investors can earn high returns in the long term. Leasing is the best option to earn profit from commercial property. Generally, the leasing period for commercial property is from 01-05 years. Also, tenants enter into a long lease period agreement to lock the price and seal the deal for a longer time. Also, depending on the size of the required commercial property, a tenant usually enters into a long lease period agreement due to the limited availability of property that matches their requirements.
Stable cash flow is also an important advantage for commercial properties. As the lease period is high as compared in residential property, one can expect a stable inflow of cash through leasing commercial property in the long run. Capital appreciation is another important advantage of commercial property. As the prices of the property are increasing by each passing day and, are also expected to increase extensively in the near future. In one of the surveys conducted worldwide, it has been observed that the investment in commercial properties has peaked post-recession period.
Feasibility to Invest in Commercial Property
The last question that arises whether it is a feasible option to invest in commercial properties or not? The answer to this question is not yet clear as there are both advantages and disadvantages associated. Advantages include- higher returns, as discussed already commercial property investment is higher yield investment as compare to residential property. No maintenance cost is also an important advantage of commercial property. As once the property is leased/rented the party leasing the property is responsible for the maintenance. Disadvantages can be, commercial properties are prone to vulnerable periodic changes in the rates of the property. Also, the underlying cost for commercial property is high. The last disadvantage has a major downturn, i.e., commercial properties are difficult to sell in the market because of the vast list of requirements of the potential buyer or tenant.
If you are thinking of investing in commercial properties Brickfolio is among the top real estate agencies in Pune. If you are looking for a competent real estate services provider devoted towards simplifying commercial property buying and selling for you, reach out to us now!