INVESTMENT IN COMMERCIAL AND RESIDENTIAL PROPERTY

Real estate has been the beacon of investment in India. Investment in commercial and residential property is regarded as a high-grade investment as it offers a tangible natural asset.

Investment in commercial and residential property has seen massive shifts in the last 10 years which have made real estate an even more lucrative investment. The commercial real estate market has grown substantially in recent decades as India has been experiencing an economic boom, more business houses have been established in India. The country has seen 7 times growth in the number of new businesses in the last decade. Due to this rise, the demand for commercial property has increased. Residential properties, on the other hand, have proven to be a sustainable option as they are usually purchased for end use by the buyer or for the purpose of long term investment. The question that arises is where should one invest – Commercial or Residential?

INVESTMENT IN COMMERCIAL AND RESIDENTIAL PROPERTY – A QUESTION

INVESTMENT IN RESIDENTIAL PROPERTY

• Rising Demand of Rental Properties: The current generation of youngsters prefers renting over purchasing a property. This is because of the changing nature of jobs. Current jobs require people to travel more, there are frequent transfers and these are less static. Moreover, youngsters don’t mind moving from one geography to another in order to grow. Hence, they prefer renting over purchasing a property. The rental market is bound to rise manifolds in the coming years, which can guarantee a high return to investors.

• Ever Growing Demand: There will always be a demand for a residential property because everybody needs a place to live. With the growing population of India, the number of new home buyers is increasing. This opens a wide spectrum of investments for the residential real estate market.

• Low Cost of Market Entry: Residential properties require a lesser initial investment to enter the realty sector. Small and medium investors find it easier to invest in the market due to the low cost of market entry. This is because commercial properties are generally required for business purposes, the property becomes a business asset. It is required for doing business, on the other hand, residential properties are majorly required for personal purposes. Commercial property in a tier-1 city may start from 5-10 crores while a residential property in the same city is half the price.

• Higher Risk: Frequent changes in tenants with low returns make an investment in residential property a less favorable choice for some investors. Additionally, fluctuations in residential property prices are influenced by many factors other than the general economic scenario. It depends on the market sentiment as well. This is in contrast to the commercial properties where the factors determining the prices can be understood more easily and strategies can be formulated well in advance.

INVESTMENT IN COMMERCIAL PROPERTY

• High Rental Returns: One of the best reasons for investing in commercial real estate over residential is higher rental returns. Commercial properties offer a higher income potential yielding annual rental returns between 6-12% depending on the area, whereas residential properties yield only 1-2% The reason for this is: Commercial properties are used for doing business, the rent is paid out of the income received from the business, the property becomes a prerequisite for business and hence stability can be achieved. For eg: A commercial property is rented to a retail outlet, the retail outlet grows with time, for such spaces, the location is a major factor in growth, now the business owner would always prefer keeping the same property, even if it means paying more rent. This benefits property owners in the long run.

• Higher Initial Cost of Investment: Entering the commercial real estate market requires a lot more capital than residential, for the same area. The high initial cost of investment makes its investment option less viable and restricts the entry for small investors. With large initial investments come running large following capital expenditures. This increases the risk as well, as the investment once has done can not be recouped easily. It required more research about prospects and a long term view to predicting the rate of returns.

• Interest Rates on Loans: If an investor wants to take a loan for his/her commercial investment, then he must be ready to pay a slightly higher interest rate. The interest rate for home loans is much cheaper than the interest rate for commercial spaces being 1.5-5% higher. The loan factor must be taken into account while making the purchase decision, as it sets the lower limit to the returns to be expected. For eg: Property Price: 10 crore, let’s say we take a loan of 5 Crore, the rate of interest is: 10%, so the interest, if we only pay the interest cost, comes out to be 50 lacs per year. This clearly means we need a property where rental would be more than 50 lacs per annum taking into account the upkeep costs, otherwise, we will lose money. If the rent is less, we need to decrease the debt component in our capital structure and maybe take a partner.
  On the other hand, we need a year on year appreciation of more than 5% which is the inflation rate to make a capital gain. Even on a 5% appreciation, we are still in profits, as the value of money taken from the bank remains the same because we will be paying the interest out of the rental income.
  Hence, the debt risk might be controlled with proper planning and research.

• Increased Effort: Although the commercial property will yield a higher return than residential, it will require a high amount of effort for the investor. The property must be chosen at a suitable place where the demand for commercial property will be higher in order to earn a higher rental income. It is a must for the investor to check the creditworthiness and the profile of the tenant. The tenant should have a stable and long term business.

• Introduction of REITs: Investing in commercial real estate can be difficult and in order to make it easy, a new innovation was introduced: REITS, Real Estate Investment Trust. In the early 1960s REITs were introduced in the US with an outlook to change the real estate market. Since then, REITs have been adopted by other countries as a preferred mode of investment. This system has helped small investors to make a productive contribution towards financing in commercial real estate. REITs adds to the advantage of investment in commercial property over residential.

• Key Markets for Investments: Some of the major markets for investment in commercial and residential property are Delhi NCR, Bengaluru and Mumbai Metropolitan Region also referred to as MMR. With better job opportunities and MNCs occupying a big chunk of land for their operations, Commercial Real estate is booming. Residential real estate is also witnessing a high demand for locations that offer good connectivity and are closer to major job hubs.

Investment in commercial and residential property: Conclusion

Any form of investment is a good investment if made congruously. Investment in commercial and residential property come with their own set of pros and cons that make them highly distinguishable. It depends on the investor’s expectations and his paying capacity. With the real estate market growing at a hearty pace, investment in commercial and residential property both have a positive outlook for growth, hence it is a win-win situation. An investor may even form a portfolio of both types to diversify his risk and guarantee himself a fairly higher return.

Note of Precaution: The investor must check all the documents carefully with the due diligence before investing in any such arrangement.

Source: https://www.spacecreattors.com/blog/investment-in-commercial-or-residential-property.php

Pre-Rented Property : A Complete Guide

Pre-rented property, as the name suggests, is a property that is sold with a rental agreement still in place. To simplify, a pre-rented property is referred to as a property that is rented to any organization or enterprise and is then sold to the buyer with that rent as an income. The transfer of lease takes place immediately after the transfer of the property to the new owner. Additionally, the buyer of the pre-rented property will now enjoy the rental income. Pre-rented properties are usually a better fit for investors as it offers a higher premium where the Return On Investment is assured.

We could use an example to simplify the aforementioned term. Mr. X owns a 5000 square ft shop in New Delhi in the main market. He/She has leased the shop to some startup at a rent of Rs 10,000. He sells the shop to Mr. Y for Rs 1,00,00,000. According to the new arrangement, the startup will now pay the rent to the new owner of the property, Mr. Y.

WHY INVEST IN A PRE-RENTED PROPERTY?

Investing in a pre-rented property has its own set of benefits. The most important one is convenience and less friction in the accomplishment of the goals of the investor. Further there are many benefits some of which are mentioned below:

• Assured returns:  When an investor invests in a pre-rented property, he is entitled to the rental income and the tenants from the previous owner. Therefore, the investor must not be in a hurry to find the tenant for his property. The investor receives an assured rental return from day 1 on his investment with absolutely no waiting period.
• No hassle in finding the tenant: One of the major pros of a pre-rented property is that it sets you free from finding a tenant for your property. The owner of a pre-rented property does not have to get involved in the long and tedious process of finding the right tenant saving him advertising costs and time too. Further, since the rental contract is already established, it saves the new owner the legal hassles as well.
• The benefit of Capital Appreciation: Apart from assured rental returns, the investor usually makes an investment in real estate with an outlook of capital appreciation over a period of time. This seems like a profitable deal for the investor if he wants to maximize his Returns on Investment (ROI). Pre-rented properties have proven that they have the potential to get rented. This helps in raising the value of the property as it increases the opportunity cost of selling. In the long run, it yields a premium price.
• Source of Regular Income: A pre-rented property being an appreciating asset can be a great investment opportunity for buyers. Since pre-rented properties are dependent on timely rent, they are often well-received for a regular source of income. This is very lucrative for investors who need a ready-made package offering a monthly income without any hassle.
• Medium to Low Risk: Investing in a pre-rented property is often regarded as a safe investment. Returns will be assured for the buyers since the property will be rented for a particular period of time. Also, the probability of tenants vacating the pre-rented property before the expiry of the specified duration is fairly low. Further, the rental agreement is pre-decided which gives the investor a foresight to plan for the future course of action and minimize his risk.
• Shorter processing time: Since the previous tenant has performed his due diligence with respect to the tenant, all the troublesome and hassle job is already done for the buyer. With all the required relevant information being available, the investor is assured of the credibility and capability of the tenant to pay timely rent. Generally, it takes time to develop this kind of credibility, while the pre-rented property offers this in a package with the property itself.
• Offer Easy Liquidity: One of the major drawbacks of holding real estate investments is their illiquidity. Since pre-rented properties yield regular rent, they are easier to sell in the marketplace. This is because of their being rented which is an added advantage over other properties. Pre-rented properties are sold more easily than other properties of a similar kind.

All these focal points drive the investors to purchase pre-rented properties. However, one should not turn a blind eye towards the shortcomings these bring. Some of them have been discussed below.

SHORTCOMINGS OF PRE-RENTED PROPERTIES

1. Huge Investments: Good pre-rented properties with prominent locations and infrastructure facilities require high investment. This becomes a major drawback restricting the investments by High Net worth Individuals or HNI’s. Small or medium investors find it difficult to invest in such properties.
2. Lease term: The investor must perform his duty of carefully checking the lease term. If the lease expires and the tenant vacates the pre-rented property, it is often time-consuming and troublesome to find new tenants. Therefore, he will have to incur a loss of rental income accompanied by diminishing returns. Further, there is a lack of control over the property since it is already rented and a longer lease period might bind the investor to the property. He/She might not be able to make any modifications to the property until it is vacated.
3. The creditworthiness of Tenant: It is a must for the investor to check the creditworthiness and the profile of the tenant. The tenant should have a stable and long term business. Many government companies, banks and FMCG’s are known to have a better holding capacity than some companies who might vacate in the absence of finding the required business.

CONCLUSION

The purchase decision for a pre-rented property depends solely on the buyer’s expectation. If the buyer wants more control, it is not a suitable option but on the other hand, if the buyer himself wants to rent it, then it is a very convenient option as it saves the buyer hassle of finding the tenant. Assured stable returns and capital appreciation make this arrangement widely popular for the commercial real estate market. In the current scenario with renting space witnessing a high growth keeping in trend with the whole real estate market, pre-rented properties offer high utility.

Source: https://www.spacecreattors.com/blog/investment-in-pre-rented-property.php

Why choose a Commercial Property for rent in Gurgaon?

Since the last two decades, Gurgaon has changed from an economical wasteland to an IT hub. It is one of the fastest rising sectors in India in terms of Commercial Real Estate. Commercial property in Gurgaon and its real estate market is getting a hot property and is attracting the attention of investors as they are getting quite big returns on commercial property and high profits on investments.

Here are a few major reasons to get a commercial property for rent in Gurgaon:

1. Major IT Hub - Gurgaon comes under the major IT hubs of India; as a result, it’s quite popular among commercial property investors and real estate companies. Further, one can easily find skillful manpower, as this city is proximity to cities like Faridabad, Noida, Delhi, and Ghaziabad.
2. Excellent Infrastructure - Gurgaon has witnessed a remarkable upgrade of infrastructural in the past couple of years, which in turn has given a major urge to the growth in this particular region. Areas such as Sohna Road, Dwarka Expressway, and Golf Course Extension are some of the really good areas in Gurgaon where commercial property investors can benefit from a good return on investment (ROI). Owing to all these compensations, Gurgaon has seen investment rise in properties including educational institutions, hospitals, resorts, hotels, housing, and commercial premises.
3. Extensive Transport Network - Apart from the economic activity of Gurgaon, it has practical advantages from several other parts of the city. The biggest benefit of this city is its ability to link, via Rapid Metro System and Delhi Metro. In addition, it has the facility of standard private shuttles and bus routes which provide transport from to and from the airport of the city.
4. Many Multinational Companies - There are a plethora of multinational organizations showing their interest in real estate of commercial property in Gurgaon given the fact that it is a major IT hub of India. Further, businesses are also booming and many domestic industries have established their base in this city. Gurgaon’s popularity as a major investment destination for real estate can be clearly seen by the fact that all foremost real estate players such as Unitech, DLF, Godrej Properties, Indiabulls, and Tata Housing have a commercial project here.
5. High Return on Investment - Commercial property in Gurgaon produces higher returns against the investments.

Conclusion:

No doubt, Gurgaon has become a hot spot for both investors and real estate companies owing to its several benefits. Gurgaon is a perfect place for investment in commercial property because it not only offers you infrastructure, but also provides you potential customers and proper security. We at Space Creators are leading edge in providing all the solutions regarding real estate in Delhi NCR and Gurgaon.

Benefits Of Investing in Pre-rented Property

The real estate sector is one of the largest industries that is globally recognized. The way we look at it is that a lot of parts or segments in Real Estate have been doing well. Over the last few years, there’s an upward trend in the Indian Real Estate Sector. Pre-Rented Property (PRP) is increasingly becoming one of the attractive investment opportunities as it generates income from day one. A lot of Investors have been very actively investing in this asset. Especially in an era post the demonetization drive, where the returns on fixed income products like bonds, bank deposits are witnessing a decline, PRP is becoming an attractive investment opportunity as it provides stabilized returns with an appreciation on exit

Let’s first understand what Pre-Rented Property (PRP) is

Pre-Rented Property means Property sold with Tenant i.e., Property leased to a grade Tenant at an agreed rent (typically in the range of 3-15 years) with a fixed security Deposit of 3 to 6 months and after that sold in the market. The lease is then transferred to the respective owner with the transfer of property, and the new owner enjoys lease rent subsequently.
Now, these returns range between 6%-8% p.a. to begin with and gradually improves on account of rent escalations, which is typically 5% on a year or 15% after three years, depending on the lease terms.

Importance of Pre-Rented Properties:

There are multiple benefits for purchasing a pre-leased property, to begin with, PRP is already given on lease and fetches a regular rental income, as the investor gets the lease transferred, he/she also receives the tenants and rental income by default. There is no waiting period for the buyer to earn Return on Investment (ROI), and later this income can be used for various business purposes.
Usually, the value of pre-rented properties appreciates over some time. And, if it is located in a premium location or with good infrastructure, design, and amenities, then the capital appreciation can go even higher.
The buyer can enjoy a good capital appreciation on pre-rented properties, provided they keep a gap of at least 10-15 years. Hence the investors can make around 16-18% p.a. returns from such an investment opportunity.
Most real estate properties are low on liquidity, as it can take months to years to sell them. However, PRP comes with the benefit of regular rental income, which makes them a more liquid investment in nature. Due to this advantage, individuals and corporate investors prefer to buy commercial pre-leased properties over unrented assets.
The other lucrative benefit for PRP is that investors can avail of a term loan against rental discounting for grade A Tenants.



Few factors that should be taken as a consideration while Buying Pre-Rented Properties are:

Duration of lease: Longer the period better it is for the property in terms of stability.
Return on Investment: Higher ROI is better, but one should see that it should be close to the ROI of similar properties in that area

Lock-in period: Higher the lock-in period better it is, locking of 3 to 5 years is standard. Substantial penalty on the Tenant on vacating the property within the lock-in period gives higher safety.

Loan on Property: The seller should clear all mortgages of bank and personal loans; undertaking from the buyer regarding the same is a must.

Furnishing of Property by owner or Tenant: Buyer should check about the furnishing/interiors of the property. If the owner has done the furnishing of the property then it is better, if Tenant has done the furnishing of the property, then it is essential to know about the disposal of interiors and furniture in that case.
         
Dues on the Property: All the dues on the property should be clear i.e.
Maintenance, Electricity, MCD taxes, House tax.

Source: https://www.spacecreattors.com/pre-rented-projects.php

AIPL Joy Gallery Gurgaon

AIPL Joy Gallery is a tremendous commercial property where you can invest your money and grow them faster like anything. AIPL Joy gallery is a high-End Mixed-Use Retail Development located at Sector 66, Golf Course Extension Road, Gurgaon, Joy Gallery offering a joyful mix of Premium High-Street Retail, F&B outlets with Food Court, Restaurants & Cafes, and Entertainment Zone.

If you're looking for premium retail shops for investment, Call 09711622995, and our expert will give you the best guidance related to property investment.

 

Features

Investments start at 1.50cr with a 10% assured return till Oct.

Spread over 4.28 acres with super area - 3,41,564 sq.ft.

Located on the main Golf Course Extn. Road in Sector 66, Gurugram.

A high-end Mixed-Use Retail Development.

A joyful mix of:

Premium High-Street Retail.

F&B outlets with Food Court, Restaurants & Cafes.

Entertainment Zone.

Pre Rented Property in Gurgaon

Are you looking for Pre Rented Property in Gurgaon? Pre-Rented Property is the best investment to earn money monthly. People from the world are investing in premium pre-rented property. From the current scenario of the world, Real Estate is one the field where you can invest your money and get hefty of amount monthly.
We have a better deal in which you can earn 90,000 monthly! Yes you can

Highlights

Ground Floor Retail Pre-Rented property at MG Road, Gurgaon

Rent: Rs. 144sqft.

15 Years of Fresh Lease

5 Years Lock-In

Contact 9711622995 now for this Deal!

For more attractive Pre-Rented Deals visit us.

AIPL Joy Gallery

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