How to invest in Commercial Real Estate in India
For more than 95% of the Indian populations, investment in real estate is considered to be residential in nature. People prefer to invest in residential properties for a variety of reasons including high demand in cities, easy to understand, capital appreciation, etc. What they don’t understand is that the rental return in residential property is 3–4% whereas the rental return in commercial property is 8–12% per annum. Commercial investment is expensive and risky but provides very high returns if done correctly. Now let us look at various investment options available for commercial real estate in India.
This is the simplest and most affordable form of investing in commercial properties. You can just purchase a shop in your locality and rent it out for good return. The cost per square feet for a shop is slightly higher than a residential property. You can also buy shops in shopping malls, but they come at a huge premium and not affordable for retail buyers. You can rent out your shop for Bank ATMs, pharmacies, lawyers, shops, etc.
This is the second widely used form of commercial investment. Office complexes come in varying sizes starting from 300 sq feet to 10000 sq ft. You need to choose the one based on your budget. The rental income from office complex is considered more stable than a shop. Rental yield is also better than a shop. You can rent your office space for other businesses, startups, banks, etc. You can enter into an 11 months contract. Office complex yields you a better advance rental too. For more information, please visit Real Estate Tips
Private Equity Funds
PE Funds or Hedge funds which operate in real estate sector invest in both residential and commercial properties. They partner with the developer for the project at the early stage and exit once the properties are sold. This is not suitable retail investors and more apt for HNI’s and NRI’s. The minimum capital required is around Rs.2 Crores.
This is the latest invention in India Real Estate industry since independence. REIT: Real Estate Investment Trust got its approval from Indian Government recently and soon will become a reality. They are quite similar to PE funds except it is suitable even for small retail investors. Money is collected from a huge number of investors and invested in properties. The rental income is distributed among investors accordingly. The minimum amount required is Rs. 2 Lakhs.
These are some of the ways you can invest in commercial real estate. You can find commercial properties in Direct owners.