You can get upto 12% returns from Commercial Real estate Investment in India.
The following key points are discussed about this alternate investment in this podcast also available in this same post as text article,
- Why Fractional Commercial Real estate Investment in India
- Logical reason to invest in Commercial properties
- Rental Income, which is better
- Risks in this investment
- 3 benefits of getting into this investment
- Companies which are in this domain
Do you want to own a Commercial Property in India ?
The desire for owning a property is inevitable, it is present in every one.
If you own a Residential Property for rental income, then you are in a mess. The average rental income you may get is less than 4% with the maintenance you need to take care off, it may not be a worthy investment.
Also any 2nd property you buy should be with the aim of generating income and it should be on an average of 8-9%. Considering inflation around 7%, this can provide an alpha of 1-2%
Remember that Fixed deposit doesn’t beat inflation and it will depreciate your buying power within a year.
Commercial Real Estate Investment
Interest for real estate has been increasing consistently across the world due to the potential growth in the value of the underlying asset. Another big factor is the rental income which these assets can generate.
Rental income is one of the biggest passive income opportunity.
You can also own a plot which can potentially grow in the next few years. This is purely from investment point of view. You can sell it off whenever required for money. This become illiquid asset
The problems associated with owning a property is,
- Maintenance cost for the property
- Associated Taxes like property & water
- Rental Income which includes both residential & commercial
- Problems from existing tenants
- Current Property value is high
Residential Properties in India
Residential Rental income in India is around 3-5%. In certain places, it can stay stagnant for many years. Rental income depends on the location and other amenities being provided.
As it is residential properties, you may need to discuss with direct individuals. If the rentals are higher, people may easily shift to next best location. You have to find the next best tenant which is the biggest head ache.
During certain tough situations you may need to provide leeway to the tenants if they were good ones. Certain repair costs & other associates taxes falls on your head. Though you can charge those things also along with rentals.
If your property value is worth around 1 crore. You can collect upto 4 – 5 lakhs as rentals for a year. Again this depends on various amenities you provide and the location.
At times you may feel like the bank deposits can provide better interest on this investment value compared to rental yields.
This simple picture across India shows the rental yield value of residential properties,
Commercial Real Estate Investment Properties in India
Commercial properties attracts commercial tenants. Commercial properties ranges from Industrial warehouses, retail properties, IT companies, Malls etc. Growth of economy is driven by growth of these commercial properties. In the last decade there has been several commercial properties which had made headlines in several metro cities.
Advantage of commercial properties are,
- Rental income of 9% and above
- Capital value appreciation
- Rental income appreciation based on agreement
- Passive income opportunity
Fractional Commercial Real Estate Investment in India
Investing in a commercial property requires huge money. Either you should have bought the property long time back without any expectation or you should have more money to acquire a property right now.
Fractional commercial real estate investing breaks this barrier of huge money . You can start investing in any big commercial properties with few lakhs in hand.
Pool of investors joins in buying a commercial property. They become the fractional owners of that property and they will have the property on share holding basis. They start getting regular rental income from immediate month as it might be a functional property with a proper tenant in it.
This entire property, right from valuations till getting a client will be governed by a company as an advisor. They get management fee for maintaining everything in proper order.
Companies who provide Fractional Commercial real estate Investing :
Some of the top companies who are in this are,
Strata for instance has properties across India in major locations. They are based out of Bangalore. They had done several IT parks, Industrial warehouses, retail spaces etc. They will take a floor or complete warehouse and does the property valuation in association with a big company in the world. They will bring in a tenant based on this valuation with a lease agreement. They also provide income projections for the next 7-8 years which is their general lease period.
GAYN Capital is based out of Chennai and they started providing this kind of service since 2022. They had done few retail outlets and a Senior living apartment in Bangalore.
You can verify any of these properties by visiting in person or through any other mode of verification.
Biggest advantage of Fractional commercial real estate investing are,
- Anyone can invest
- Rental with capital value appreciation
- Suitable for people looking for passive income
- No registrations, maintenance etc
- Transferrable or can be sold for liquidity purpose
This podcast is hosted by Ganesan Thiru. I provide solutions for Investing in Mutual Funds, Stocks, Fixed Instruments, NCDs, Commercial Real Estate etc.,
I provide investments, insurance and loans.
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