A strategic approach is required to identify the right type of commercial property for investment. Here is a list of 12 must-do operations for investors to help them find investment-worthy commercial properties.
In-Depth Market Research
Align your goals with emerging real estate growth hubs, especially in Tier 2 and 3 cities . Examine upcoming projects, local purchasing patterns, and expenditure trends for comprehensive insights.
Lease Structure Understanding
If leasing the property, familiarize yourself with gross and net leases, lease terms, maintenance responsibilities and tax implications. A well-drafted lease agreement is crucial for hassle-free management.
Value Assessment
Utilize methods like the Cost Approach, Market Approach, Income Approach or Sales Comparison Approach to assess the property's value based on its nature and purpose.
Approval Verification
Ensure the builder has obtained all required approvals from local authorities and possesses essential documents like title deeds, NOCs, occupancy certificates and RERA approval. Also opt for a reputed builder with a proven track record for delivery and quality as it can significantly influence leasability and investment.
Layout Plan Evaluation
Structure the property's layout plan, ensuring compliance with development codes regarding plot sizes, road networks, public amenities and open spaces.
Location Assessment
Focus on multimodal connectivity through roads, metros, railways or airports. Areas with developing markets and potential for future growth, despite current connectivity limitations, often yield long-term returns. Evaluate past & current trends, predicting future development for impact on property value over time.
Risk Acknowledgement
Recognize inherent risks in every investment and assess your risk appetite. Invest only what you can afford to lose, considering factors like credit risk, inflation, location development , liquidity and regulatory changes.
Infrastructure & Environment
Investigate the physical infrastructure and environmental aspects of the property's surroundings, including connectivity, green spaces and ongoing development projects.
Rental Income Calculation
Research local market rates and understand taxation on rental property, considering exemptions provided under Section 24 of the Income Rax Act to calculate expected rental income.
Expert Consultation
Consult with real estate advisors, lawyers and developers particularly if you are starting out in the business. You can identify commercial properties that fit your location, investment objectives and preferred building size with the use of online resources- MagicBricks.com, 99acres.com, Housing.com, Makaan.com.
Flexibility & Scalability
Evaluate the property's flexibility for multi-purpose use and its potential for scalability, taking zoning laws into account to ensure future expansion opportunities.
Tenant Quality
For office spaces, investigate the quality of tenants in the area. Secure long-term lease agreements with reputed companies to weather economic downturns effectively.
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