Why is investing in commercial property in India considered to be advantageous?
The real estate in market was more focused on residential properties in India. However, in the past few years, people have started understanding the advantages of investing in commercial property. This type of property is usually used for offices and conducting businesses. Commercial properties include apartment buildings, retail buildings, offices, industrial buildings, warehouses, etc. Here are some of the advantages of investing in commercial property in India.
Earn more money: Investing in commercial property provides you with the opportunity to earn more money. While renting the place to someone, you will be paid according to the usable square footage available, which is not common for residential properties. Moreover, the price per square feet is also greater. If you have invested in a retail or apartment building, you will receive rent from more than one party, thus being able to receive a sizable income. This happens because the commercial properties are valued differently.
Long term leases: If you buy commercial property in India for India, you can give it on lease to other companies or businesses. The best part of the lease agreement in terms to commercial property is that it is always signed for a long term (5-20 years). This guarantees that you would receive continuous cash flow for these years. Also, the rent amount increases every few years, helping you to earn more.
Low risk: When the tenant of your residential property leaves, your cash flow stops unless you get another tenant, which may take a lot of time. However, in case of commercial property, when one out of five tenants leaves, you will only lose a small section of the rent amount.
Triple net lease: Most commercial properties are rented with triple net lease, which is quite advantageous for the owner. Properties with triple net leases have to be maintained by the tenant. Along with paying rent, the tenant agrees to take the responsibility of all the maintenance and repairs of the property. The insurance and real estate taxes are also paid by him or her. You, as an owner, will receive the rent and do not have to pay for any repairs or maintenance, which is not in the case of residential property. The owners of the residential property are fully responsible for the maintenance and taxes of the property. This makes investing in commercial property much more beneficial. Here, you only have to pay the mortgage for the property.
Annual returns: The average annual return of commercial property is much higher than residential property. There is likely to be 6%-12% hike on the purchase price annually in terms of commercial property. However, the annual return on single family properties is not more than 4%.
In the last few years, real estate is considered to be a much better investment platform than shares and bonds, as it involves less risk. The scene of commercial property in India is developing considerably and hence investment in commercial real estate would be profitable. However, be careful and invest in good commercial properties.