NRI Special: How to invest in commercial properties in India

For NRIs looking to invest in India, it is no better a time to understand how to invest in commercial properties in India. We bring you a comprehensive list of how to go about it.

For those NRIs or Non-Resident Indians keen to invest in India, investment in commercial spaces can work wonders. According to industry experts, NRIs prefer commercial properties. In a quest for high yields, high networked individuals or HNIs also continue to throw hat in the ring. Coupled with the sheer pride of ownership along with diversification of portfolio, these investments act as a cushion against stock market volatility and inflation.

We bring you commercial property investment tips to ease your investment journey.

Location

First and foremost is the location of the commercial property by analysing its soundness and its market dynamics of demand and supply, NRIs can get a sense of the area. Without sufficient research, one may end up buying into micro markets with higher vacancies. So it is important to ensure that job market, economy and population growth are healthy.

Type

There are different types of commercial properties in India including office and retail. Smaller spaces are much easily available as well. As per experts in the industry, it is much more preferable to look for commercial spaces in high streets rather than a mall because there is no control over tenant and trade mix as there is no guarantee to attract customers.

Expected returns and the outlay

For a commercial property investment in India, a minimum budget of Rs 3-4 crore is necessary, state experts. It is important to note the commercial rental yields from properties as it represents the productivity of the price. So, a commercial rental yield in India of at least 11-12 per cent is to be ensured. If the rental yield is less, the property stands overvalued. Since there is no profit on the sale of appreciated commercial property, the rental cash flows of a good location-based shop or office space is considerable. When it comes to commercial vs residential property investment in India, the income that can be generated from commercial property determines its value and with good research, investment in commercial property in India is a high-returns game, as per experts.

Ensure due diligence

Just like investment in residential properties, commercial property investment also calls for due diligence. Make sure the credential of the developer are checked, quality of property management, essential amenities, access to public transport and potential for infrastructure development are paid attention to.

For example, investment in a retail store needs pointers like frontage, dynamics and footfall to be considered. NRIs need to be very careful while looking at an income-producing office asset through checking cash flows, expenses such as property tax, building insurance, lease terms, expiry dates, long-term capital appreciation, refurbishment, vacancy issues, lock-in period, refinancing among others.

NRIs investing in commercial properties in India need to be aware of the neighbourhood area, understand the dynamics of the environment and take sound decisions as per their needs.