Identifying Promising Commercial Properties For investment

Ashwinder R Singh, CEO – Residential, Bhartiya Urban & Co-Chair, CII NR Real Estate

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. Platforms like CBRE provide detailed market research, providing past, real-time and predictive insights.

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, familiarise 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

Recognise 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 Tax 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, 99 acres.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.

The article is excerpted from the book,’ Master Commercial Real Estate’ written by the author. The book offers a detailed roadmap for navigating the CRE market, ideal for both novices and veterans. It covers foundational concepts and delves into advanced topics like financing, market analysis and legal compliance. The book demystifies zoning, valuation and funding strategies, and provides expert insights into economic indicators, risk management and tenant acquisition. It is a vital resource for making informed investment decisions, managing complex transactions and staying abreast of industry trends to achieve success in CRE.