Real estate has been, is, and will continue to be the most popular investment option in the world. Investors like to have higher amounts of their portfolios devoted to safe and relatively non-volatile investment options in times of uncertainty and volatility, such as the past year amid the several waves of the pandemic.
The purchase of a property for the aim of ownership or profit is referred to as property investment. This can be accomplished by either improving and selling the property or renting it out. This has been seen to be extremely profitable.
Before you invest in commercial real estate after a pandemic, here are some pointers to keep in mind:
Existing tenants, their financial situation, and the terms on which they are currently leased are all aspects that can tell you a lot about the asset’s long-term viability and how profitable your investment will be. Historical data on lease terms and vacancies will give you an idea of what to expect if there is a tenancy gap during the period in which you decide to invest. In comparison to a special-purpose warehouse or laboratory, general-purpose office space is more likely to be utilized. However, the latter can outperform the former in terms of capital appreciation and tenant stability.
Government bodies impose a variety of legal requirements, such as tenant laws, registration procedures, and property use restrictions, among others. It is also necessary to have a reputable lawyer or legal firm investigate the property’s title. When it comes to secondary sales, these criteria become even more crucial. Property-related legal difficulties are time-consuming and expensive, therefore it’s best to have all legal perspectives evaluated by a legal specialist. You should also keep an eye out for any charges or outstanding dues that the seller and broker may have disguised in the property documentation and sale agreements.
Your asset’s performance is largely determined by its location. Both residential and commercial real estate is affected by this. Accessibility via roads and railroads, major highways, proximity to airports, and seaports are all elements that influence the asset’s worth and potential appreciation over time.
In India, the capacity to negotiate with the developer has traditionally been related to the price of a property. Developers who give openness and fairness in their pricing, where prices are only tied to the worth of the underlying units, should be considered. This will ensure a level playing field regardless of whether one wishes to buy or sell at a later date.
Infrastructure and Emerging Neighbourhoods
True, commercial real estate does not experience the same market fluctuations as most other types of traditional investments. Changes in the market, on the other hand, have an impact on the vacancy rate, rental rates, and occupancy stability. The Covid-19 epidemic is an excellent example. Because individuals aren’t going to work in office spaces, commercial office space rentals have dropped in several areas.
(By Dr. Amish Bhutani, Director, Bhutani Grandthum)