Why you should invest in commercial property

Why you should invest in commercial property

Property & Real Estate

Umesh Pawar

Umesh Pawar

30 May 2016, 10:30 — 3 min read

Growth and change are inevitable, but sometimes change occurs due to a need. Need and necessity are thus the prime movers of invention and intervention. This phenomenon is most evident in realty and rentals. Nowadays to have a roof over one’s head is a necessity and lucky are the ones who have it. With the necessity getting fulfilled the demand ultimately shifts to a second home!

And hence there exists a huge demand for rental housing spaces. To cater to this need, realtors went hammer and tongs to build more and more homes resulting in oversupply and consequent stagnation in housing rents.

The India of today is a land of entrepreneurs whose mantra is ‘Make in India’. From production, services, outsourcing, education and beyond, every field now looks promising. A common thread that unites all these sectors is the need for office space and more so, rental office space given the skyrocketing real estate prices, tight budgets and cost controls. Given the demand-supply mismatch and need for highly personalised office spaces, the returns in terms of office rentals (8-10%) are better than rentals from housing (3-5%).

A new concept making a splash in the field is that of Office Retail Complexes (ORCs) which provide ‘Luxury Boutique Offices’. Your office is no longer made up of staid walls and a peeling ceiling! It is almost a replica of a high-end luxury hotel’s foyer which is luxurious and has all the amenities such as conference rooms, meeting rooms, high-end cafeterias, recreation areas, wi-fi connectivity, tight security besides the usual facilities like washrooms and elevators.

Here are some of the advantages that ORCs guarantee you.

  • Rentals in the range of 8 to 11% against 2 to 4% for housing realty. Your EMIs (if any) get more than covered by the rentals leaving you with extra income.

  • Capital appreciation of 1.3 over residential realty. Lower risk to money flows. Typical housing leases are for 11 months which may or may not get renewed. Office spaces on the other hand typically go for 4-5 year leases.

  • Ever-increasing incomes. A 9% increase in rental is the least you may expect which means your cash cow never ever runs dry!

  • ORCs typically are a retail concept and in areas with varied activities, which means someone or the other is always eyeing your property.

  • ORCs provide all that is required for an office to run efficiently- in an enviable environment comparable with high-end hotels.

  • Given the small ticket size, entry barriers due to investment sizes are completely done away with.

 

These are some of the reasons why investing in commercial real estate is an excellent choice for growing your wealth.

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Umesh R Pawar

We are Realty Advisory Network known in the past as Dream Works Realty. We are in the business of assisting in real-estate transactions in Pune be it residential or commercial...

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