An investment in commercial real estate typically requires a sum of money that is beyond the means of a lone retail investor. REITs and fractional ownership are the two most popular ways to invest in commercial real estate.
The reopening of workplaces and the strengthening of the economy are contributing to the remarkable performance of the commercial real estate sector in India. Commercial properties are secure investments, according to real estate experts, and they can generate high rental revenue. What, therefore, qualifies commercial real estate investment as the best possible investment choice?
Compared to other conventional investment choices, commercial real estate investments offer the following advantages:
- It is protected against changes in the market and is stable and provides a steady rate of return as a long-term investment option.
- It has a lock-in period that protects your investment capital and guarantees profits.
- Any commercial real estate with a specific use such as office space or warehouse in a prime location has the potential to be a veritable treasure trove. It will be in high demand from a particular type of tenant, guaranteeing that the investment will continue to generate returns as a passive income.
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High Rental Yield and Opportunities
Commercial real estate is chosen over residential real estate in various large cities because it provides a high return on investment. Residential investments only provide a 2-3% rental yield, whereas commercial properties in business districts and IT parks provide a 6-8% yield. Commercial buildings in highly desired CBDs can generate a higher yield of 7-9%. Shops in malls and shopping centres, meanwhile, can provide a yield of up to 9%. The return on other assets, such as warehouses, can be comparable and range from 5 to 6%. Similar to residential assets, commercial properties offer profitable capital appreciation during the midterms due to the surge in demand for them.
see also – Things to Know Before Investing in Commercial Real Estate
Office Space: Potential for Higher Returns
Within the commercial sector, offices are the most sought-after investment option, with co-working spaces becoming the norm. With significant demand from IT, law, and retail companies, the region is experiencing robust commercial traction. In the commercial real estate industry, flexibility has become a synonym while hybrid workplaces are luring businesses.
The future of commercial real estate will gain more attention by investing in workspaces that come with current working requirements in a secure environment as the provision of adaptable office spaces that are accustomed to changing work patterns and aid businesses in reducing their operational expenses are high in demand.
NRI Investments in the Commercial Real Estate Market
Growing industrial activity, the emergence of business parks, and the creation of economic zones in suburbs like Gurgaon, Faridabad, and Sohna Road have all contributed to the growth accelerators that support demand in the sector. The commercial real estate market is being overrun with NRI investments in the residential and commercial sectors.
The Indian government has also adopted several reforms in the sector, such as the RERA. With all these improvements, the commercial real estate sector will soon be a tremendous investment opportunity for investors.
Conclusion
Since property values and rental rates typically rise in tandem with an increase in consumer prices, commercial real estate can be as useful as a hedge against inflation.
Mainstream investors in India have traditionally seen commercial real estate as a secure investment choice. Its strong returns on investment and promising future growth continue to draw investors.
