For Non Resident Indians who desire to invest in real estate, investing in India, especially on a commercial property could be quite a win/win deal. However, with so many real estate developers across the country, finding a commercial property is not as difficult as investing in the right one is.
Mentioned below are some of the important tips that will help an NRI to choose the right office space for sale:
- Prior to selecting a commercial property for investment, ensure that you check the job market, population growth and economy of the place as these factors eventually help in regulating the property price. Furthermore, investors should check the location of the property. Remember that appropriate research is very much needed before investing.
- In the next step, you should focus on the type of the commercial property that you want to invest. Check whether that includes retail and office spaces too. Earlier, urban commercial centers only had large units available but now to attract the small investors, the smaller units have also come up.
- You should keep a higher budget for any commercial investment as this will provide you higher returns on the investment. While buying a property make sure that you get at least 11 to 12% of the return. The capitalization of the property depends on the demand for the property and the income that you get from a commercial property will determine its value.
- Just like the real estate investment, commercial real estate investment also requires proper due diligence. In order to do the same, you should check the credentials of the developer. In case you are investing in a retail store you should consider the foot-fall and frontage. If you are investing in an income producing office property then you should look at the vacancy factor, the division of cash flows, expenditures such as property tax and building insurance, maintenance, lease term, expiry dates and lock-in period, refurbishment, and long-term capital appreciation potential.
- Ensure that every document associated with the building such as trust deeds, closing statements, loan documents, deed title etc. are studied properly. Also, you should take care of the business licenses, property bank statements, engineering, payroll registers and other design plans, advertising contracts, environmental reports etc. In fact, if required you can hire the lawyers to understand these documents in a better way.
- When it comes to any investment, a number of risks are associated with it and the same applies for the commercial property in India as well. So, ideally, you should keep a track of the risk that may be directly or indirectly associated with investing in the commercial property. It is important to note that the commercial property loans may not include the advantages of a home loan. Therefore, you should include the financing costs before you get into an agreement.
Investing in commercial property is a much harder game than buying and renting residential properties. Becoming an owner of a commercial property with multiple tenants is like getting into a small business. But by following the above-mentioned tips you can easily invest in the right commercial property and reap the benefits in the long run.