Following the COVID-19 outbreak, the real estate market is experiencing difficulties. However, due to revived demand in the sector, a rise in the number of start-ups, and approving policy pronouncements in Budget 2021, commercial investment is a better alternative if you want to diversify your portfolio and generate greater capital returns.
The industry is ready to emerge entirely from the crisis and present an excellent long-term investment opportunity for investors, having demonstrated robust growth momentum. In the world that has emerged after COVID-19, the following are some of the reasons why investing in commercial real estate could be a smart choice:
Remarkable Return on Investment
Your office space’s location and connection offer a solid return on investment. With more individuals investing in their enterprises, commercial real estate is highly demanded. You may rent out your office space and turn it into a wonderful source of revenue. You may also sell your office space and make a lot of money in a short period. You are on the receiving end of a beneficial transaction in both cases.
Long-term & Stable Investment
Since they have the potential to bring in consistent rental income, commercial buildings like offices, stores, and warehouses, as well as other types of commercial real estate, make for safe investments. More extended lease periods are more common among commercial tenants, giving owners a more consistent and predictable income stream.
For the most part, office space is an excellent long-term investment. If the firm does not yet have a head office or corporate office, the lease term might be extended to ten years, with the option of renewal at the tenant’s request. Vacancy risk is reduced by pre-leased commercial premises previously rented to tenants.
Easy to Leverage
LRD (lease rental discounting) allows property owners to acquire pre-leased/pre-rented commercial properties using debt. LRDs are a type of term loan offered by banks that use rental income as collateral and have 7-9 percent annual interest rates. Property investors can borrow up to 65-70 percent of the property’s worth using LRDs.
The benefit is that the loan’s EMI is generally lower than your monthly rent. If you pay back the loan at the end of the period, you’ll have a four-times return on your one-rupee investment. Rental property owners can also employ lease rental discounting to supply much-needed liquidity that appears to be deficient in immovable assets.
The market has seen two successful REIT listings in recent years, namely Embassy Office Parks and Mind space REITs. These are both examples of successful REITs. Strong interest from investors was demonstrated by the fact that the listing for the Brookfield REIT was purchased eight times over.
In the wake of REIT’s success in India, global investors believe that an institutional exit is possible for their investments. The convenience of investing in REITs is a significant advantage for regular investors. Small investors now have simple access to high-value real estate, which was previously only available to huge institutional investors. While commercial real estate appears to be a promising investment, it requires significant capital. As a result, before investing in a home, speak with a real estate broker to better understand the market dynamics.