A real estate property provides either residential space or commercial space. A person can opt for both; however, the person would have to own two separate properties. In this article, we will focus on understanding the details about investment in commercial real estate.
Every market has a cycle with frequent ups and downs. The real estate market is no different. Even though the current equity market is performing at its best, it will not last long. Before the market loses its charm and the right time to invest moves on, let us understand why this is a good time to invest in private commercial real estate.
Private Commercial Real Estate
- Every real estate space is categorized into different grades. The most preferred grade is Grade A. The demand for it is immense but the availability is very low. The Grade A category real estate spaces are preferred by multi-national corporations. Amid the Covid-19 pandemic, the demand for commercial real estate property is going strong as against the perception that the demand is low.
- The other reason why the performance of commercial real estate amid the Covid-19 pandemic is better is because of the demographic conditions of India. As per the estimates, the majority of the population would be below 25 years shortly. As compared to any developed country, the lifestyle of India is very different with a lot of preference being given to work-from-office culture. Observing this trend of urbanization, the rates of real estate have increased and the investment opportunity has therefore become more attractive.
- When compared to the general methods of life savings like Fixed Deposit and Fixed Income, to name a few, only the real estate sector has witnessed a stable growth at the rate of 8-10%. The mentioned life savings, on the other hand, dropped to the rate of 5-6%. Another aspect that adds to the reason for investing in the commercial real estate sector is the ability to get into lease agreements with multi-national corporations.
With the largest and reputed global funds like Brookfields and Blackstones having their maximum allocations placed in the Indian retail sector, this is truly the right time to get on board. The commercial retail sector of India is growing rapidly and is expected to serve high yields in the future. The level of maturity that the market currently has is perfectly depicted by the perfect balance that the stability and returns have attained. A person can grab this opportunity by participating in the investment rounds.
Why Commercial Real Estate Investment
The trend of commercial real estate investments has now been rising for a while. A commercial property carries a lower risk as compared to a residential property. This is the reason why lenders are more inclined to allot funds to commercial properties. Another reason for the inclination of the lenders to allot their funds to commercial properties is the growing demand by the business owners who are in need to buy a space either for their office or warehouse.
The best places to buy commercial real estate are four cities. These are Delhi NCR, Bengaluru, Mumbai, and Hyderabad. A person can invest in the commercial real estate either through a fractional platform or by directly purchasing the property in person.
Return Profile Of Residential And Commercial Real Estate
When compared with residential property investment, commercial real estate is more lucrative. In terms of returns generated, the commercial real estate property yields return in the range of 8% to 10%. The residential property investment yields lower returns in the range of 2% to 3%. The best commercial real estate investment in the most desirable neighborhood is a great long-term holding.
The Barriers To Commercial Real Estate – An Investor’s Perspective
- There are different price ranges of investment in the real estate industry. The most common are the ones with a lower value of investment within the range of ₹25 lakh and ₹1 crore. The commercial real estate property demands an investment in the higher range of around ₹50 crores. It becomes challenging for many investors to gather this amount of funds.
- A developer is required to invest a lot of money while selling real estate property. This, however, applies largely to residential real estate property. When it comes to commercial real estate property, everything depends on the kind of relationship that the developer shares with the relevant company that is about to lease the land. Myre Capital enters the picture at this point and widens the commercial real estate investing opportunities.
Why Should One Invest In CRE?
- Many businesses have closed their doors forever in the prevailing economic conditions. The equity market, under similar economic conditions, has witnessed a boom and made good returns on an investor’s investment. This denotes behavior that resembles a bubble-like environment, enticing people to invest more money for high rewards, even if it carries high risk.
- People turn to real estate investment when inflation is high as returns in the equity market are comparatively low. The diversification of their investment into the real estate industry provides them security against the rise in inflation. The concept of commercial real estate investing includes the offset of loss that the investor would have otherwise incurred had he or she relied solely on the equity or other similar market.
- It is only the real estate that provides regular monthly cash inflow to the investor. Since the lease owner or a tenant pays rent every month. The commercial real estate sector ensures that the owner continues to make decent money. From his or her investment in the commercial real estate property. This is based on the condition that the property must not be sold too early or held onto for a very long time.
- Holding a lease for a long time is the best way to invest in commercial real estate. The long-term hold over the lease yields the rental income in the range of 8% and 10%. This is considered to be a highly competitive return on investment as it is nearly double the rate that is offer by Fixed Deposits.
Why Myre Capital?
Everything related to commercial real estate investment is handle by Myre Capital. The process from starting point to the ending point completed in a maximum of 20 minutes with assistance of digital support. The functions are on similar lines to what other investment classes like equity and debt work offer over the internet.
The adoption rate of technology in commercial real estate has been slow. However, Myre Capital has worked on it and eroded the entry barriers. Allowing others to participate in the investment rounds without putting in a lot of money. The users of the platform get access to A-Plus managed properties. They assigned a dedicated manager who they can reach at any stage of the investment process.
You can also read: Types of Construction Management