Commercial Purpose - For Your Best Choice
- That is not residential land but its used for carrying out business operations so it is considered a commercial purpose in real estate
- The estimated returns from residential real estate properties are around 3% – 4%, whereas, from commercial properties, it is around 8% – 10%.
- Always there is a solid intrinsic value.
- In commercial real estate properties, both the land and the structure has value and it is a hard asset.
- One of the most popular investments among the modern population is Commercial real estate investment rents.
- Commercial real estate investments have a high potential to provide high profitability.
- The office space and business space demand are always used to increase according to the rapid growth of more and more businesses in the market.
- Investment in commercial real estate property is the safest and more secure type of real estate investment.
- According to the data released by the India Brand Equity Foundation, the Grade – Office space will cross 700 MSF by 2022. This proves that commercial property investment will be fruitful in the coming years.
- The Budget 2021 has also relaxed the debt financing norms for real estate investments trusts
- It will pave the way for institutional funding in commercial real estate listing assets and help investors to earn higher returns
- In the Growing Population and Opportunities, there is also a surge in the number of offices and commercial properties for sale in Chennai.
- The commercial purpose (Land) will give you an admirable ROI.
Investing in Commercial Land is a Good Idea
- Despite the pandemic Situation, also the investors looking for safe growth in Commercial property
- The points contributing to the exponential growth of commercial purpose in land properties are as below
- Attractive option for MNC’s
- Chennai has emerged as a business hotspot welcoming many MNCs, Indian companies as well as Startups to set up their offices in Business parks.
- Also, the commercial real estate properties segment has performed much better than residential realty in terms of ROI over the last few years.
- The valuable reasons are many (Ex.) The proximity of NCR to the National Capital by all modes of transport and the availability of modern options for commercial office spaces
- Start-up trends
- The favourable Government policies boost the entrepreneurial spirit among the youth to start businesses of both small and large sizes.
- So the demand for office spaces is on the rise which ultimately improves the growth of commercial properties.
- Exponential growth of it hub
- Chennai is home to advanced technologies, skilled professionals, and affordable real estate, which contribute towards its emergence as the fastest growing IT Industry in India.
- This is the main reason Chennai is the favourite choice for commercial property investment.
- Furthur with the rise of e-commerce, there is an increase in demand for warehouses across the country.
- Thus, the growth of commercial purposes happens naturally.
- Development of extraordinary quality with fusion of technologies
- The commercial property real estate now uses construction focused drones, hardware, 3D printing, smart wearable, pulsed radar object detection, immersive technology and Radio-frequency identification (RFID) to deliver a pleasant customer experience.
- These innovative tools and applications are changing how construction companies design and execute projects.
Investing in Commercial Land
1. Stable and secured investment
- Commercial real estate for lease investors ensure steady cash flow
- Commercial land as commercial purpose on GST Road real estate gives more income steadily as compared to shares, stocks and other bonds.
- Steady cash flow is very helpful in Commercial real estate investments.
- This kind of Income stability can keep investors stress-free.
- The commercial real estate market is not affected directly due to a dull financial market.
- And particularly at the time, the financial market was volatile.
- Commercial lease agreements are long-term in nature. Unlike residential real estate, commercial properties provide regular income.
- Besides this, the provision of the annual increase in the agreement ensures a high and consistent return throughout the year.
- The site selection should be perfect. If we buy plots in Chennai as commercial property in the right location, it will keep the safety and prevent the loss of cash inflow even during times when they don’t have tenants occupying their properties.
- So, it is the safest and most secure type of real estate investment.
2. Net lease options
- A Commercial property owner has the option of signing a single-, double-, or triple-net lease agreement with the tenants.
- This offers the owner the flexibility in accruing operational or maintenance costs from the tenants.
- Out of all types, the triple-net lease ( NNN ) is the most beneficial for landlords as the tenants have to pay rent and bear the majority of expenses.
3. Equity
- Equity is the amount of value an investor has built up over a period of time.
- For commercial purpose real estate investment, the investor can build equity quickly with steady and relatively high returns.
4. Easy management
- Usually, big corporations or institutions like Banks, Retail Outlets, IT Companies etc… pay the rent for the spaces regularly.
- Since these entities are highly professional and always maintain business ethics. So, it becomes easier for a commercial property owner to deal with the tenant’s commercial land.
5. Less expenditure on furnishing
- Starting from hotels and restaurants to banks and saloons, every business wants to design and furnish their commercial units as per their needs and requirements.
- This allows you to offer raw and unfurnished units to tenants, thereby making your commercial property investment less with less amount spent on furnishing and interior designing.
- So, you have to invest a lot of money and also your time in furnishing the spaces.
6. Leverage
- The possibility to buy an asset without having to pay fully provides profitability to the investors.
- It increases their leverage resulting in higher gains compared to other asset types. This is a major advantage.
- The opportunity to use mortgage and downpayment helps the investors to avoid the burden of full payment at a time and to adopt term payments.
7. Value appreciation
- The commercial purpose gets appreciation in value and this leads to significant benefits.
- The commercial land investment in a premium location with new developments will be financially beneficial.
- For example, if our commercial property is stationed in a Metropolitan City. And a proposal has been accepted by the Government to construct a new Metro line and an example near our property location. Then, the return is very high and unimaginable.
- Making cost-effective improvements and adopting Proactive management can improve the desirability of the asset.
- Commercial real estate properties always offer excellent appreciation values.
- With the excellent socio-physical infrastructure, the value of a property is bound to appreciate well.
8. Good rental yield
- We can expect a rental yield anywhere between 6 – 8 % of the property value for a good commercial property.
- The rental yield is the percentage of the annual earnings generated from income-generating assets.
- Even Though the total return depends on many factors like the types of units and location, the profits can be in double digits for a premium location.
9. Quality
- Commercial properties involve much financial investment.
- One can offer it in terms of loans and other funds.
- The commercial land at posh and swanky places with advanced amenities bring more opportunities for business.
- These premium types of commercial properties always cost more.
The List of Commercial Properties
- Shopping malls
- Shopping complexes
- Office complexes
- Retail outlets
- Hotels and Resorts
- Industrial units
- Warehouses
- Factories
- Mixed-use lands ( Residential and Commercial spaces )
- Health care infrastructure ( Hospitals, Nursing Homes, Medical centres, etc… )
Commercial Real Estate Properties – The Basis of Investing
The key factors to be considered for the investment
1. Proper understanding of real estate market trends
- For a proper comparison purpose, analyse the latest economic trends prevailing in the neighbourhood of the selected area.
2. Factors that impact market rate.
- The factors which have an impact on the market rate to be considered.
- The current and projected rate hikes, trending job sectors, unemployment rate and other such factors that might impact the market must be studied.
- These factors should be clearly understood things to check before buying a plot to make an investment without regrets in the future.
3. Proper comparison of the neighbourhood.
- Proper analysis of tenant rates, recent sale prices and price square feet of comparable properties in the neighbourhood is essential for a proper comparison with the neighbourhood.
- commercial purpose, land has a very high potential to yield results, as they come with higher rent and prices.
5. Proper research
- Proper search works with equal homework is a must on the essential factors to avoid any financial issues.
- It is better to know about the developer personally, its intakes, and knowledge on various sites of the same location, its reputation, and its position in the market.
- Check the authenticity of the paperwork and have clear discussions with your tenant or broker regarding the advance payments.
5. Location and accessibility
- The location should be easily accessible for the clients, stakeholders and employees.
- And also, it should ensure the entire wholesale business activity and is easily accessible by consumers and traders.
- Having a favourable location is the biggest asset to a company. So, I need to have a convenient location with good accessibility.
6. Infrastructure
- For the good growth of the company, the comfort of the employees and clients are important.
- The security, parking spot, power backup are essential in the list of amenities and facilities.
- The flexible EMI Options, leasing Options, and renting accommodation with permanent furniture are some of the attractive offers in Office Space Offerings.
- Many service providers offer co-working offices as well.
- Ample parking places, advanced security systems, spacious and large commercial plots are very good examples of exemplary office spaces with integrated amenities.
- The flexible workplaces which cater to the particular type of business are highly appreciable.
7. Growth potential
- For a good growth potential, a well-defined Commercial land, for a commercial purpose is required for a business to cater to different segments of people.
- This type of space should bring an appreciable amount of ROI.
- Determine the compatibility of your business for a particular locality.
8. Budget
- It is better to prepare a list of the expenses you need to bear. Ex of some of the various expenses – Construction costs, restoration costs, electricity etc.,
- It gives a clear idea about the expenses to be taken.
- And also select the places which offer low maintenance costs, security personal, and renovation costs.
- It gives a clear idea of how to cut down on costs as much as possible.
- Be clear about the advance payment procedure and the other EMI instalments.
- Try to invest in places that can provide amenities and facilities at their best for the budget.
- Always opt for attractive cost-saving options.
- Be sure about the advance payments before shifting to the place
- Because having a backlog can make your business financially unsound.
9. Decide the time of investment
- The investor has to think over the demand factors and constant changes in the market.
- The work at the home option of the current day trend is the main deciding factor for many organizations. So changing work practices are very important.
- The organizations think about the recession and are very very selective about the investment choice.
- There are office spaces available with furnished or semi-furnished options.
- Some of the places are temporarily rented with furniture and some of the places are permanently rented with furniture.
- It is better to invest in places that are built around with interaction and very good proximity.
Types of Commercial Real Estate Properties
The key factors to be considered for the investment
1. Proper understanding of real estate market trends
- For a proper comparison purpose, analyse the latest economic trends prevailing in the neighbourhood of the selected area.
2. Factors that impact market rate.
- The factors which have an impact on the market rate to be considered.
- The current and projected rate hikes, trending job sectors, unemployment rate and other such factors that might impact the market must be studied.
- These factors should be clearly understood things to check before buying a plot to make an investment without regrets in the future.
3. Proper comparison of the neighbourhood.
- Proper analysis of tenant rates, recent sale prices and price square feet of comparable properties in the neighbourhood is essential for a proper comparison with the neighbourhood.
- Commercial property has a very high potential to yield results, as they come with higher rent and prices.
5. Proper research
- Proper search works with equal homework is a must on the essential factors to avoid any financial issues.
- It is better to know about the developer personally, its intakes, and knowledge on various sites of the same location, its reputation, and its position in the market.
- Check the authenticity of the paperwork and have clear discussions with your tenant or broker regarding the advance payments.
5. Location and accessibility
- The location should be easily accessible for the clients, stakeholders and employees.
- And also, it should ensure the entire wholesale business activity and is easily accessible by consumers and traders.
- Having a favourable location is the biggest asset to a company. So, I need to have a convenient location with good accessibility.
6. Infrastructure
- For the good growth of the company, the comfort of the employees and clients are important.
- The security, parking spot, power backup are essential in the list of amenities and facilities.
- The flexible EMI Options, leasing Options, and renting accommodation with permanent furniture are some of the attractive offers in Office Space Offerings.
- Many service providers offer co-working offices as well.
- Ample parking places, advanced security systems, spacious and large commercial plots are very good examples of exemplary office spaces with integrated amenities.
- The flexible workplaces which cater to the particular type of business are highly appreciable.
7. Growth potential
- For a good growth potential, a well-defined Commercial plot for a commercial purpose is required for a business to cater to different segments of people.
- This type of space should bring an appreciable amount of ROI.
- Determine the compatibility of your business for a particular locality.
8. Budget
- It is better to prepare a list of the expenses you need to bear. Ex of some of the various expenses – Construction costs, restoration costs, electricity etc.,
- It gives a clear idea about the expenses to be taken.
- And also select the places which offer low maintenance costs, security personal, and renovation costs.
- It gives a clear idea of how to cut down on costs as much as possible.
- Be clear about the advance payment procedure and the other EMI instalments.
- Try to invest in places that can provide amenities and facilities at their best for the budget.
- Always opt for attractive cost-saving options.
- Be sure about the advance payments before shifting to the place
- Because having a backlog can make your business financially unsound.
9. Decide the time of investment
- The investor has to think over the demand factors and constant changes in the market.
- The work at the home option of the current day trend is the main deciding factor for many organizations. So changing work practices are very important.
- The organizations think about the recession and are very very selective about the investment choice.
- There are office spaces available with furnished or semi-furnished options.
- Some of the places are temporarily rented with furniture and some of the places are permanently rented with furniture.
- It is better to invest in places that are built around with interaction and very good proximity.
Commercial Real Estate
1. Multifamily real estate
- Multifamily real estate is a residential property with more than one residential unit.
- Multifamily real estate can be further divided into Duplex/Triplex/Quadruplex.
- The uniqueness of owning and renting out multifamily real estate yields multiple streams of income from the numerous families that would occupy the residential units in the property.
- It is easier to convert to commercial earnings through renting out the units.
- It is an excellent straightforward step forward for investors looking to transition to commercial real estate.
2. Office spaces
- Office spaces of Real-estate are also in good demand. Based on the property’s style and location, there is scope for it to be multi-tenant on commercial purpose.
- For some Office spaces, because of their multi-tenant capacity, There are few tasks required to find tenants for office spaces.
- Always the notable office spaces are known for their added benefits, the convenience it provides to their consumers.
- The setup should be able to reap the benefits of financial investment.
- It takes a significant function to set up a work environment, and there is a cost bifurcation in terms of automation, maintenance and construction work.
The office spaces can be further divided into
- Central Business District
- Business districts that house a collective group of big companies.
- Commercially Zoned Homes, Medical Office, Suburban Office Buildings, etc.,
3. Industrial spaces
- Industrial spaces are those that accommodate industrial activities, including production and manufacturing units for businesses.
- The advantage of low entry cost and flexibility attracts the investors for an easy entry.
- Industrial real estate investment and commercial investment had a good growth since the last economic cycle.
The different industrial real estate types are as below:
- Bulk Warehouse
- Flex-Warehouse
- Heavy manufacturing Unit
- Light Assembly Unit
- Cold storage Unit.
- Industrial Showroom, etc.,
4. Retail spaces
- Retail real estate property is that type of real estate that houses businesses that sell products and services directly to customers.
- Retail real estate properties include community retail centres, power centres, regional malls, neighbourhood shopping centres and more.
- Retail real estate properties are centrally located in the heart of the town to be more accessible to customers.
5. Hospitality spaces
- Resorts, Entertainment parks, Hotels, Home-Stays, and more come under this category.
- Hospitality real estate is to serve travellers and people looking to unwind.
- Hospitality real estate also includes budget hotels, extended-stay hotels, full-service hotels, limited-service hotels, short-term rentals, etc.,
- The investments are subject to price and demand fluctuations.
- The demand and value appreciation for commercial properties keep changing with various factors from time to time.
- With a drop in demand, the price of your potential investment property is about to dip, vice versa.
Selling Procedure for Commercial Land
If one wants to sell a commercial property like sell a shop, sell office space, one needs to provide the following documents
- The property tax paid receipt
- Sale deed
- Katha certificate
- Occupation certificate
1. A brief on locality advantages
- Mention the city.
- Mention the locality.
- Mention the street.
2. Details about the sale
- The current price and the expected increase in the price of the property.
- The availability of facilities.
- In Chennai, the people are very particular about the parking facilities.
- The safety and security of the property.
- The prospects for developments in the immediate future.
- The prospects for developments after a certain period of time.
3. Availability ranges
- Commercial plot is below 30 lakhs to 5 Crores.
The Major Hotspots of Commercial Land for Commercial Purpose
The commercial spaces should be of nature that would help to elevate the commercial business to the next level.
- Perambur – SPR City
- North Chennai development areas – Ennore, Red Hills, Royapuram, Tondiarpet, and nearby areas fall in North Chennai. And also the North Chennai is becoming “Industrialized, this is a positive for commercial business”
- South India Development – Areas surrounding Adyar, Velachery, Thoraipakkam and Injambakkam.
- Guindy – Mount Poonamallee Road.
- Perungudi.
- Thalambur.
- Pallikaranai – Medavakkam
- P.T.R. Road.
Conclusion
- The commercial real estate market is on a higher growth side with policy reforms and constant infrastructural developments.
- The estimated returns from residential real estate property are around 3% – 4%, whereas, from commercial properties, it is around 8% – 10%.
- But the leasing process is complex in commercial properties.
- The factors that impact the market rate should be clearly understood before buying to make an investment on commercial land without regrets in the future.
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