Tag Archives: real estate investment

Real Estate Vs Stocks: Which Has Better Returns on Investment?

September 18, 2020 Myfollo 1 Comment

The choice between real estate and stock markets is dictated by choice, personality, and risk appetite. There are only a few stocks that can beat the appreciation of prime property and no amount of real estate investment can compete with an early-bird investment of blue-chip stocks.

Which has better ROI? Stocks or Real Estate

Preferring Real Estate Investment to Investment in the Stock Market

Real estate requires a lot of research and is an asset that cannot be readily liquidated into cash. Some real estate is a cash-generating like apartment buildings, rental houses, and strip malls. This is a much more comfortable investment for lower and middle classes as they are more exposed to this kind of investment. Rents provide an important source of cash flow every month and therefore improve the amount of cash in the long run.

The chances of fraud are minimal within real estate as owners can physically inspect the property for damages and repairs. The availability of home loans grants landlords an opportunity to invest within structured debt for appreciation.

commercial real estate investment — Commercial Real Estate Investment

Property has been a significant hedge against inflationary pressures in an economy and therefore safeguards money against inflation. Owning a tangible asset can grant more control through its investment.

Real estate provides some tax benefits as income derived from real estate is not subject to income tax. Rent provides an income shield against mortgage payments. Dividends from stock are uncertain as compared to rental income that is fixed for the duration of time.

The prices of real estate property appreciate over some time and have an intrinsic value from which it cannot fall. Real estate provides an excellent method to use borrowed capital to accelerate the number of holdings in the same sector. This is the most common method of using leveraged funds.

real estate value appreciation — Real estate value appreciates over time

Responsible investment in real estate improves community standards by improving housing availability, maintaining the property, and increasing local tax revenue. Repairing and maintaining dilapidated housing enhances the self-esteem of neighbors and other rentals in an area.

This field provides an excellent route for entrepreneurship and real estate companies foster some kind of business spirit between tenants and landowners. Real estate grants people an opportunity to monetize property through its rent, lease, or sale. Real estate investment can be partial, and all potential costs can be dispersed unto loans.

Preferring Investment in Stocks to Real estate

Buying stocks and reinvesting its dividends generates wealth over a long period. Stocks are a liquid form of investment and are purchased or sold at ease as compared to real estate. Share purchases grant a small part of the ownership of a company. How stock market works in India is detailed concept in itself so we won’t get in that.

Diversification of stock portfolios is more accessible in the stock market as compared to real estate investment. A transaction fee within stock markets is significantly cheaper than real estate transaction costs.

investment in stock market — Investment in Stocks

Stocks provide dividends; these are a portion of a company’s earnings distributed to all shareholders. Stock ownership does not generate any kind of workload for shareholders. The amount of capital required for investing within stocks is significantly lesser than real estate.

Real estate requires more massive amounts for initial investment, and all company ownership bought and sold from stocks can as little as a single share.

Share ownership grants voting rights to holders at annual general meetings and also grants control at a majority share. Purchases are made at ease by opening up a brokerage account. Stocks markets facilitate buying and selling stocks and make transactions convenient for shares. This form of investment grants capital appreciation as a potential return for investment.

why invest in stock market — Stocks markets facilitate buying and selling stocks

Share ownership carries limited liability, and therefore holders are protected from the financial obligations of a share and liable to the shares face value. Common stocks are a crucial means for companies to raise capital for expansion.

Substitute for traditional real estate – REIT (Real Estate Investment Trusts)

A real estate investment trust (REIT) is a company that holds, finances, and operates properties to generate income. This can generate a steady stream of income for investors but offer little capital appreciation.

Most REITs are publicly traded stocks and are considered highly liquid investments. Apartments, data centers, healthcare facilities, and hotels are traditional properties held at REIT portfolios. REITs can earn rental income, management fees, and mortgage income. This tends to focus on a particular segment of properties and leads to specific types of companies.

A lease is a contract between an owner and user of a property that lasts for twelve months or more. Both a landlord and lessee can sign an agreement that grants the right to operate a business on the property in exchange for some compensation. There are different types of leases available for investments. This concept is different from rent as rental agreements only last for a month.

Fix and Flip Strategy refers to a strategy of purchasing property and then renovating it with anticipation of profit. Investors buy property at a discounted rate due to its conditions of disrepair and invest in its upkeep and repairs.

Real estate wholesaling refers to the practice of contracting home with a seller then finding interested parties to buy the home. This kind of seller generally finds distressed clients for contracts and puts their properties for sale.

Problems that people Face While Selling or Leasing their Properties

August 4, 2020 Myfollo

The real estate market in India is one of the oldest industries and selling, buying, or leasing of properties have been going on for decades. But have you faced real estate marketing challenges before selling or leasing their house? Whether you hire an agent or not, selling a home is a tedious task.

The property selling process is a daunting task with an emotional journey, especially for the first-timers. Furthermore, its time consuming as most of your time will be spent in attending the buyers or tenants. After that, buyers will find every possible way to criticize and negotiate on the amount. With this emotional turmoil and nor prior experience, homeowners face challenges in selling a property.

Problems while selling property — Problems while selling a property

As for those planning to lease their property, disputes with tenants can increase your stress level. Disparities between landlord and tenants mostly occur over the delay of payments, escalation of the rental amount, cleaning and maintenance of the property.

property management services in gurgaon delhi — Property Management Services in India

So to solve property leasing issues, incorporate transparency in the relation between the tenant and owner, you first need to know what problems you might face.

Overpricing your estate
The roof problems
Selecting an incompetent agent
Home violations
Adding lousy images
Deciding on the rental amount
Selecting a credible tenant

7 Problems while selling & leasing of properties

Are you confused about what to do while selling a house? Here are some significant challenges most sellers face.

Overpricing your estate

The biggest obstacles of selling your home or leasing is overpricing intending to receive maximized profit. But the price of the house must have a strategy so it can sustain in the market. It is imperative to research the market analytics of the current homes, reevaluate the pricing and offer a standard rate in the competitive market.

The Roof problems

Several lenders and bankers are unwilling to approve home sales having roof problems. It can lead to a decrease in home valuation while selling. So you can either opt for a home equity loan or personal loan to cover up the repairing expenses or find an investor willing to purchase the home with cash offers.

roof leakage problems in a property — Roof problems in a property

Selecting an incompetent agent

An incompetent agent devoid of market knowledge can impact price listing strategy of the house. So hire a proficient agent armed with prior expertise as their advice plays a pivotal role in determining the market value of your home based on its present condition, neighbourhood, and location. Realtor problems must be sorted before you select the best offer for your home in the market.

Home violations

If there has been a home violation on your property, it is best to mention it at an early stage to the buyers. So before entering the market, it is a top priority to get a home inspection done and select a contractor to fix the code violation issues and make your home ready for sale. A home devoid of violation and in excellent condition can escalate sales.

Adding lousy images

Nearly 44% of the home selling process is done online. So your house needs to create an eye-catching impression in the eyes of the buyers. But what most sellers fail to add are high-quality images, thus limiting their market reach. With professional photographs of your house and leveraging technology, it can make a big difference in the market.

Deciding on the rental amount

A market survey is an essential step before you decide on the rental amount. Several other factors such as the neighbourhood, proximity to transportation, and most importantly, the facilities offered by the property must be checked before you state a price.

how much rent should i charge — Deciding, how much to charge rent?

Selecting a credible tenant

There is nothing worse than having disputes with tenants that can even drag to the court of law. So before you finalize, the tenant checks for his/her CIBIL score and enquiries about the previous landlords’ experience.

finding credible tenants for property — Finding a credible tenant

5 Common mistakes to avoid while selling a property

Here are some of the most common property selling mistakesyou must avoid.

Failure to analyze the profit from house selling

Selling a property should be profitable either to pay off the existing loan amount or for personal benefits. But what most sellers forget is to calculate the exact cost incurred by selling a house which also includes repairing expenses suggested by the home inspection.

Incorrect pricing of home

As an owner, you have the flexibility to state any price for your house, but that might hinder the process of selling as the price may not fit the bill according to the market value. So it is necessary you understand the worth of your home, take keen insights from the current housing market, and place a price.

Skipping pre-home inspection

A deal can go topsy-turvy if a buyer brings forth a home inspector to evaluate the current situation of the house. If there are ample repairs to be done, your negotiation price can eventually go down the hill. So it is best to have your home inspection done before entering the market.

Forgetting to clean the house

It’s not just high-quality images but instead the original version of the house that will impact the buyers. So before you plan to sell the house, opt for a deep cleaning session, repair the flooring or small cracks on the wall, paint the house, and preferably make your home energy efficient.

Lingering a home tour

If you are up for quick sales, don’t make the mistake of delaying the home tour as you might miss a potential buyer. But before you invite them for a visit, clean your house, the garden, and even the backyard to create a strong impression.

Conclusion

Real estate is a booming sector, and several real estate companies in India can help you provide adequate assistance to allow a seamless transition of the selling and leasing process. But before you embark on property selling or leasing look for the legalities as legal documents in real estate play a pivotal role in determining the future of your property. Though submitting your property for mandate to a professional real estate organization like MyFollo makes the path smooth and hassle free.

7 Reasons Why Delhi NCR is Suitable For Real Estate Investment

July 23, 2020 Myfollo

delhi ncrsuitable for real estate investment

A research study in 2019 suggested that India’s real estate investment garnered approximately $970 million. Moreover, the total investment in real estate for the year 2019 was $5 billion. This growth in sales and revenue generation is despite the current slowdown in the Indian real estate sector caused by the coronavirus pandemic. The research study also suggested that real estate investment in Delhi NCR has been the highest generator of revenue for investors in the year 2019, with approximately $610 million.

Further, Delhi’s investment accounts for 63% of the total real estate investments in India & followed by Mumbai ($410 million) and Pune ($150 million). The increasing influx of capital has caused the real estate future in India to have a positive outlook.

To ease your decision process, these are the seven out of several reasons to sell/buy a property in Delhi NCR:

Industry-friendly Policies
Growing Job Opportunities
Advanced Infrastructure
Potential Areas
Appreciating Investment
Highly-captivating Commercial Sector
High Standard of Living

Why invest in Delhi NCR Real Estate?

Although there are tons of sources available online for research today, many investors are still confused regarding regions to invest. To ease your decision process, we have collated a list of seven reasons to sell/buy a property in Delhi NCR.

Industry-friendly Policies

Industry leaders expected the government to come up with stimulus packages for housing finance companies and incomplete constructions. The government announced a unique INR 30,000 crore package for housing finance companies to boost their liquidity and INR 10,000 crore for incomplete construction works. The Finance Minister, Nirmala Sitharaman, announced that the cabinet is working towards launching, Smart City 2.0 mission in the Union Budget 2020-21. These initiatives are going to be favourable for the realty sector and upcoming residential projects in Delhi NCR.

Growing Job Opportunities

Increase in job opportunities due to infrastructure — **Increase in job opportunities due to Real Estate in Delhi NCR**

Nowadays, there has been an increase in job opportunities in Delhi NCR and Gurugram. A large number of world-renowned companies are setting up offices in India’s capital. It has led to a rise in the demand for real estate in Gurugram. The job opportunities and subsequent payments are expected to rise soon & are also likely to fuel the real estate sector in Delhi NCR and Gurugram.

Advanced Infrastructure

Infrastrucuture in Delhi NCR — **Real Estate in Delhi NCR**

Infrastructure forms the vital support system of the real estate sector. The government has allocated funds for the completion of Jewar Airport in Delhi NCR. The massive project is expected to support multi-national corporations (MNCs). This will boost the economy. Projects like this are expected to propel the developmental activities in Delhi NCR further to accommodate the rising demand for commercial and residential real estate.

Potential Areas

Bhiwadi, Bahadurgadh, Raj Nagar Extension, Kundli (Sonipat), Faridabad, Sohna (South Gurugram), Dwarka, Yamuna Expressway, Greater Noida, and Noida Extension are some of the developing areas in Delhi NCR. In these areas, activities of setting up advanced infrastructure are running on all engines.

Investors in the real estate sector have a keen eye on these areas and potential investment opportunities to reap benefits within the next few years. Gurgaon or Gurugram has also contributed significantly to investors’ rising interest, with an influx of luxury retail brands and swanky corporate offices. Areas such as these have increased real estate investment opportunities in Delhi NCR.

Appreciating Investment

The real estate sector in India often witnesses ups and downs. Delhi NCR is one such region in the country, wherein the real estate properties are expected to appreciate over the next few years continually. This is most likely due to the ongoing efforts to set up advanced infrastructure in the region.

The rise in demand fuels the future appreciation of real estate properties in Delhi NCR is surely going to increase the value of NCR location. A rented house usually causes money to go down the drain, whereas money spent in a self-owned house becomes an asset. Also, the value of the home you bought today will appreciate significantly over the next few years.

real estate an appreciaiting asset — **Appreciation in value of Real Estate Asset**

Highly-captivating Commercial Sector

The most alluring feature of Delhi is its captivating commercial sector. It is expected to scale new heights over the next few years. Similar to previous years, 2019, too, witnessed growth in Delhi NCR in terms of area.

The increasing demand for Grade A offices from FMCG companies, banks, and IT companies is increasing rapidly. Retail stores have also witnessed a rise in demand over the past few years. These factors have reaped enormous benefits for property owners.

High Standard of Living

People usually move for higher education and change cities for jobs and opportunities. All this is done with the ultimate aim of achieving a better standard of living. There has been increasing real estate investments in the Delhi NCR region due to the rise in the influx of Fortune 100 companies, the development of advanced residential projects in Delhi NCR, and the advent of big supermarkets and shopping malls.

Over the past decade, people’s lifestyle in metro cities has changed drastically, owing to their increased income and the rise of luxury amenities.

Conclusion

Delhi NCR is poised to become the most developed city in India. It provides promising amenities to its residents as well as MNCs. There has been an increased awareness regarding the understanding of rising demands in real estate properties, which has caused an increase in real estate investments in the region.

If you are in a state of dilemma regarding what to choose between commercial or real estate, you can read our previous blog. Property owners in Delhi NCR are hence, expected to witness a significant rise in their profits from real estate investments.

Properties in Delhi NCR — **Real Estate Investment in Delhi NCR**

The Future of the Real Estate Industry in India after Covid-19

July 17, 2020 Myfollo

The Covid-19 has infected millions of people across the globe and claimed numerous lives. On 11th March 2020, the World Health Organization (WHO), declared Covid-19 as a global health emergency. With this announcement, all businesses including real estate companies started realizing the impact of coronavirus and turned negative in their outlook.

Imports and trades worldwide have been severely hit, and a grim uncertainty lies ahead. Businesses in varied sectors have to rapidly address the changing needs of suppliers, customers, and employees. Such a step would help organizations navigate through the operational and financial obstacles posed by the coronavirus pandemic.

Indian Real Estate Sector before Covid-19

Before the Covid-19 crisis, the Indian real estate industry had strong fundamentals such as stable leverage ratios, capital available, and leasing activity. The sales of the Indian real estate market were booming, with rising industrialization and an increasing number of workers flocking to metro cities.

stats of real estate before covid — Before Covid-19 Real Estate Stats

The real estate sector in India was backed by healthy economic conditions and had a positive outlook, which led to the growth of real estate in India. The future of the real estate sector in India, at this stage, seemed promising, owing to strong fundamental and increasing demand for residential and commercial real estate.

Impact of Covid-19 on Real Estate Industry

The impact of coronavirus on real estate in India has also been unprecedented. The lockdown, which was enforced for two months, severely affected trading activities. This is expected to affect the prices of steel and other commodities required for construction activities. Even though all restrictions are lifted, difficulty in the procurement of raw materials will reduce construction activities over the next few months.

Real estate prices are expected to see a correction in future, despite a rise in construction cost and labourers’ return from their hometowns to metro-cities. This correction in real estate prices is expected, mainly due to panic selling by some real estate owners and marred buyer sentiment, in the resale market. Most of the new construction projects have been postponed until October.

corona impact on indian real estate — Short and Medium Term Impact of Coronavirus on Indian Real Estate (Source: Housing.com)

This will most probably assist in pushing the selling prices up in cities. Going forward, owners should understand the impact of Covid-19 on Indian real estate and make decisions regarding potential opportunities and available capital. Owners with long-term leases are protected from the near–term impact of coronavirus pandemic, for now, depending on the liquid capacity of tenants.

Whereas, occupiers of these real estate properties will have to deal with challenges regarding the effective operation, liquidity needs, and reduced workforce. India’s government has given tax-incentives for business owners, which can help occupiers offset the short-term impacts of the pandemic.

Present Scenario of Indian Real Estate Market

Taking this into consideration, real estate prices are expected to see a correction soon. According to the survey of 99acres.com, more than 50% of the homebuyers have deferred their purchase decisions. Nearly 3/4th of real estate brokers who participated in this survey said that due to the reduction in the buyer’s interest, the prices have gone down.

During this lockdown, many buyers & sellers will also be facing difficulty to find the best deals, but Myfollo has been doing its job greatly even during this pandemic to by providing the best deals to its clients.

But some say that the opposite has happened & the current pandemic situation has hastened the decision of the buyer who was interested in buying a home. PropTiger data shows that sales in the housing sector of nine major cities declined by almost 80% in the period between April-June 2020. A years-to-sell survey conducted by JLL reveals that the average time to clear the unsold inventory has also risen to more than 3 years due to this pandemic.

Future of Real Estate in India

India has taken specific steps to reopen the country and reinstate economic activity after four stringent lockdowns. The government has, however, given strict instructions to all citizens to follow hygiene norms and social distancing guidelines.

The construction sector in India has been permitted to carry out activities with the norms laid down for sanitization and safety. Construction workers are being educated regarding these norms and guidelines to follow while working on construction sites.

construction activities — Impact on Construction Activities

India’s government has almost done away with the boundary of Red, Orange, and Green zones. Areas in India are now being recognized as on-containment and containment zones. Containment zones are often subjected to stricter lockdown regulations to curb the spread of the virus.

Barring a few containment zones & construction works has resumed in numerous parts of the country. The government of India has also given relaxations to all sectors, including real estate, to revive the economy and prevent it from going into depression. Owners, occupiers, and construction workers have to follow the guideline laid down by the government strictly if we are to see a definite growth pattern in the real estate industry over the next few months.

The real estate in India after the coronavirus pandemic is poised to see a slow recovery. And real estate prices are eventually expected to go up since real estate has and always will be an appreciating asset with HNIs and family offices also preferring real estate over other investment opportunities.

Conclusion

There has been a significant decrease in buyer interest and property visits, due to the ever-increasing threat of the coronavirus. The impact of coronavirus is being realized on increasing scales every day. With such a scenario, the real estate industry has to prepare itself for another potential downfall in the economy.

potential decrease in buyer interest and real estate growth — Potential decrease in buyer interest and real estate growth

Making preparations now will go a long way in ensuring healthy business activity later on. And as well all know, situations usually get much worse before they get any better.

The world has witnessed such outbreaks of viruses in the past, such as Ebola virus, Zika virus, and Sars virus, among others. And the world has successfully recovered from the grips of these deathly viruses. Every downfall allows business owners, to restructure and scale new heights in the future. The Indian real estate should also find areas to restructure and renovate their businesses today, to thrive in the booming economy tomorrow.

Why High Net Worth Individuals (HNIs) and Family Offices should invest in Indian real estate market?

July 13, 2020 Myfollo

featured image for hni real estate investment

An investment decision backed by educated insights often helps us to achieve our aspirations. A majority of the investors in the market have a portfolio with diversified assets such as government schemes, bonds, gold, and stocks. However, the extremely underrated and neglected investment asset, in today’s times, remains the real estate.

Owing to increased economic growth, the average income of citizens residing in cities has increased drastically. This has given a boost to the demand for real estate, and this demand is expected to grow significantly soon. Such a scenario has allowed investors to invest in real estate today, to reap benefits tomorrow. However, many investors are still unknown to the workings of real estate and its benefits as an investment vehicle.

HNI and family office investment in real estate — **HNIs and Family Office Investment in Real Estate Sector**

Real estate investment in India is often considered to be a scarce resource and is a hard asset. Investment in commercial property in such a scenario can be extremely good for the long-term. Investment in commercial property has an intrinsic value associated with it, which appreciates over a certain period.

Unlike publicly-traded securities and the involved volatility of public investments, direct investment in real estate can provide steady cash flow in the form of rental income. Having real estate in one’s investment portfolio can have advantages such as portfolio diversification, long-term appreciation, and net cash flow. We at MyFollo have amazing offers for HNI investment options in India.

Pros of investing in the Real Estate

We all are aware of the possible financial benefits we might receive from investing in real estate. There are many benefits to investing in real estate that outweigh the risks, and you, as an investor, will gain a steady flow of income to ensure long haul financial independence. If you back your investments with well thought out real estate investment strategies, the benefits of it will help you reap attractive returns. Here are some of the pros of investing in the real estate sector:

Steady Income

A steady income is one of the most prominent benefits of investing in the real estate sector. Depending on the location of your real estate investment, you can earn significant returns over a specific period.

benefits of investment in real estate — **Benefits of Real Estate Investment**

Long-term Financial Security

When you invest in real estate, you ensure a steady flow of cash for a long duration. This investment thus enables you to gain financial rewards for a long time. The main aim of investing is to be financially able and have long-term financial security. An investment in real estate helps you achieve just that.

Tax Benefits

Tax benefits are one of the most alluring advantages of investing in real estate. For example, the self-employment tax in India is not levied on rental income. Moreover, the government offers relaxation for property taxes, legal fees, travel expenses, maintenance repairs, insurance, and property depreciation. And the icing on the cake is that investors are subjected to lower tax rates for long-term investment in real estate.

tax benefits by investing in real estate — **Tax Benefits from investment in the realty sector**

High Appreciation

Investing in real estate is not for the short term since the benefits of this investment are often realized in the long-term. Real estate investment usually appreciates over time, thus increasing its resale value. In other words, the value of the property that you have invested in today will increase multiple folds by the next 10 years.

benefits of real estate investment — **Appreciation of property value**

Why should HNI invest in real estate?

High net-worth individuals (HNIs) should consider investing more in real estate as compared to other asset classes. Different asset classes such as equity are more prone to volatility, and hence many times fail to give attractive returns.

The high appreciation of their investment often guides HNI investment in real estate in abundance as compared to that of a small investor, and can keep a portion of their funds locked in an investment for a longer duration, they should invest in real estate. HNIs should formulate strong real estate investment strategies and aim to achieve attractive returns shortly.

HNI investment options in India are attractive, such as residential and commercial properties, which have the potential to generate attractive returns. For HNI’s, investment in real estate would yield more stable returns and would help them increase their investment value multiple folds over time.

Global stats as compared to india of hni investment in real estate — **Global Exposure vs HNI Investment in Real Estate**

Why should family offices invest in real estate?

A family office is a privately owned business that manages financial services and asset management for an affluent family, intending to build and distribute wealth successfully through generations.

Many are often confused as to how do family offices invest. The sole purpose of a family office is to manage investments to sustain long-term prosperity and wealth. Investment by family offices can be either in variable income-generating assets or real estate.

family offices investment in real estate — **Family Office investment in real estate**

In the current times of extreme market volatility, real estate investment for family offices has proven to be a boon. Family offices should increase their investments in stable assets such as real estate, to ensure sustained growth over the long-term. Given the comparatively low association with the capital markets, investment in real estate for family offices is ideally. Suitable for diversifying their equity, debt, and other alternatives portfolios.

Wealthy families often have an objective to preserve value rather than to aim for appealing returns. Hence, family offices have a crucial goal to safeguard a sound legacy for their client’s future generations. Real estate investment, in such a scenario, helps family offices achieve the desired preservation of value.

Both HNIs and family offices have a common desire to separate certain assets from their main business line and safeguard them to build a long-term value-appreciating asset. Real estate investment, in this case, is the right path to venture on, for both HNIs and family offices, to create sustained growth.

HNIs and family offices need to formulate strong operations and strategies for indirect or direct investment in real estate. Formulating a definite plan is extremely important since it will take numerous aspects under consideration, such as diversification, returns, risk, and control.

Investors should be careful while opting for indirect real estate investment, as it gives limited flexibility, in the event of changes investor preferences or fund strategies. Direct investment in real investment offers better control, and investors can decide for themselves. In any case, conducting thorough research is a must and can help in generating sustained returns over time.

How income-generating commercial real estate is an investment asset class?

July 6, 2020 Myfollo

The commercial real estate market in India is an umbrella term for real property, which is utilized to generate profits for the owner. Commercial real estate examples include warehouse, apartment buildings, malls, hotels, medical centres, industrial property, and office building. Unlike residential real estate employed for personal use by the owner, commercial real estate is employed to generate cash flow. Commercial real estate investment in India has historically awarded thousands of investors for reaping attractive returns, as an alternative asset. However, many investments are still unknown to the workings of commercial real estate and its benefits as an investment vehicle.

commercial property illustration — Commercial Properties

The commercial real investment market in India, as an alternative asset class, also gives an investor the ability to diversify his or her portfolio. A smart and educated investment in the commercial real estate can provide a path for an investor to diversify their portfolio by including, broader and local economies. This is possible in the case of commercial real estate investment in India since a specific commercial real estate asset’s success is related to local market dynamics.

Some of the upcoming markets for considering commercial estate as an investment asset, are Delhi NCR, Mumbai, and Bengaluru. Commercial real estate investment Delhi NCR is gaining prominence and is expected to yield attractive risk-adjusted returns for investors over the next few years. Commercial real estate investment Delhi NCR, Mumbai, and Bengaluru are expected to rise over the next decade. Small investors are gradually becoming aware of the benefits of investing in commercial property and are considering commercial estate as an investment asset. A steady approach with a thorough study of the market can assist in reaping attractive returns in the near future.

Return on investment in commercial real estate — Increasing returns on investment in commercial real estate

Factors to consider while considering real estate as an investment

There are numerous factors that need to be studied while considering real estate as an investment. Some of these factors are as follows:

● The location of the property and its survey

When it comes to commercial real estate investment in India, it is all about the place. Several considerations come into play when it comes to the purchasing of commercial lands, such as infrastructure projects currently under construction in the region, distance to neighbouring towns, public transport, and road accessibility.

● Evaluating the financial condition of the tenants

There are a variety of considerations one should pay attention to when investing in a building with existing tenants. The tenant’s revenues on a weekly, monthly, or annual basis can prove as a key parameter, as they provide a more reliable reflection of the investment’s profitability.

● Documentation

An overall document review is essential because it will assist in getting a better understanding of the legal work the investor should take care of. This includes papers (in the case of resale property) related to the transfer of ownership and mortgage.

● Market Dynamics

Studying the dynamics of the property form that one is choosing is essential. When looking at investing in retail, consideration should be given to the short-term and long-term effects of customer demand and e-commerce on a tenant. Looking at workplaces, one should understand how developments such as telecommuting and co-working might have an effect on office space demand. The investment in commercial real estate property should be ideally carried out in an environment of low interest rates since this would support the demand for both borrowing and property.

commercial office space transactions in India — Commercial office space transactions in India in 1st half of 2019

investment in real estate sector in India stats — Real Estate Sector expected growth in India

Pros of commercial real estate investment in India

Potential of generating high income
Higher equity potential – increase in cash flow via leveraging
A high number of tenants – low risk
Advantage of security
High appreciation value

Why commercial real estate investment is better than the residential real estate investment?

The value of an investment in commercial property is easy to increase.

The market value of a residential property is measured by means of the average cost of similar properties in the vicinity. This study can be based on primary characteristics such as the number of bathrooms, bedrooms, and so on and so forth. So, to sum it up, a two-bathroom and two-bedroom house with state of the art appliances, has the same value as that of a two-bathroom and two-bedroom property with basic amenities, in the same block.

A more precise approach is used to value commercial real estate. The local factor surely takes into consideration. However, the revenue generated by the property forms the basis of its market value. So, an inexpensive strategic improvement of the property, which can assist in increasing the revenue generated by the property, can have a massive impact on the resale value of the property.

Commercial properties often come with longer lease terms
As compared to residential leases, commercial leases are much longer. Commercial real estate lease is usually for a minimum of three years, and leases for 5 to 10 years are not unheard of. Whereas the residential leased are typically for 12 months or one year. Some of the benefits of having a long lease include:
- Lower turnover costs
- Lower vacancy rates
- High assurance of receiving a reliable cash flow

However, there can be a downside to long-term leases, if in case a property owner is not pleased with a tenant. The owner, in this case, can ask the tenant to leave by choosing not to renew a short-term lease.

commercial vs residential real estate — Commercial Real Estate vs Residential Real Estate

Unlike publicly-traded securities and the involved volatility of public investments, direct investment in commercial real estate can provide steady cash flow in the form of rental income. Having real estate in one’s investment portfolio can have advantages such as portfolio diversification, long-term appreciation, and net cash flow.

Commercial real estate is often considered to be a scarce resource and is a hard asset. It has an intrinsic value associated with it, which appreciates over a specific span of time. The cost associated with commercial real estate has caused it to be limited to institutional investors. However, with the advent of the technology age of the 21st century, there are numerous platforms that have made this investment easier for small investors as well. It is, however, advised to read the policy document carefully before making a decision to invest, so as to understand the benefits of your investment thoroughly.

Real Estate Market Trends vs. Forecasts – What to go by?

February 1, 2016 Myfollo 6,715 Comments

In the last few years, the real estate market trends in India, have not been encouraging. The markets, especially in the residential properties segments, recorded a slowdown. The prices have remained stable with multiple options available for the buyers, though the commercial real estate has been optimistic. Also the capital appreciation in the short term has not been significantly high.

Given the background, the real estate industry is also regrouping themselves with major players working on delivering projects and building their portfolio to gain trust. Also with the new government policies like Make In India, FDI and 2020 vision, things are looking optimistic for the real estate market. The recent Start-up India will also give an impetus to the real estate market. Based on studies and experience the forecasts for the Indian Real Estate Market looks very promising. The top 3 highlights are:

Tier II cities: The meteoric rise of the Indian real estate market, specially in metros like Delhi, Bangalore, Mumbai and Hyderabad can be attributed to the technology and start-up hubs. It is now the time for the Tier II cities like Indore, Lucknow and Chandigarh to taste success. Local and national level developers are now focussing on the Tier II cities like Pune because of aspirations, successful business start-ups and steady growth in employment opportunities.

Simple payment structures: The developers and banks are working towards easing the pressures of the payment plans. This would lead to more participation from buyers to invest with small monies and pay off gradually with easy payment plans.

Smart Cities: The government showing active interest in building 100 smart cities and increasing the FDI participation in the reality will give a positive boost to the real estate market. Hopefully with participation from local investors as well as NRI’s there would be a growth in these smart cities as well.

For the prudent investor it is advised to move from the wait and watch strategy to slowly start expanding portfolios to newer markets, especially the tier II cities and prime pilgrimage locations. One needs to move out of the comfort zone of familiar localities and start Identifying and investing in feasible properties for better returns.