Important things to consider before investing in commercial real estate
In the current turbulent climate, commercial property remains a lucrative asset class because of its performance in terms of capital gains. It continues to be a valuable source of stable rental income.
Commercial real estate has grown exponentially over the past decade. Estimates highlighted by several reliable media sources have shown they have attracted $ 15.4 billion in equity since 2011 in RERA, Real Estate Investment Trust (REIT); The Infrastructure Investment Trust (InvIT), etc., which increases transparency and thus consumer confidence, has helped to increase investment especially in Class A commercial space.
Due to the numerous infrastructural developments, the National Capital Region (NCR) has the second largest share of PE investments since 2011 (Knight Frank). This positive growth coupled with lucrative returns on capital has increased the value of commercial real estate for investors. Investing in Noida is currently a trend among investors as low-cost Class A properties are currently being built. A PWC report highlights: Commercial real estate investments in Delhi NCR with a view to buying new office space are increasing by around 30% annually, particularly in Noida.
In fact, as a real estate zone, the Greater Noida West is currently experiencing the highest density vertical development in Asia. In the past 3 years, Greater Noida has seen its population grow to 3 lakh and over the next 5 years we can expect population to grow to 10 lakh. Much of this population is made up of a young, emerging workforce who is great from a commercial property standpoint as it provides a “ready made” workforce for potential businesses looking for space.
Another promising aspect of Greater Noida West is that it doesn’t depend on Noida connectivity at all. The Meerut Expressway connects this area with Delhi and other regions in the region, creating great development potential. What makes this region even more lucrative is its connection to the Delhi-Mumbai industrial corridor (a dedicated freight corridor), which allows easy access to trade and proximity to Jewar Airport.
With all of the above positives in mind, investing in Greater Noida West offers a good return on investment, residual income, and further growth potential. With all of these good points, customers need to be careful and do their due diligence before investing.
Here is a list of points to consider when investing in commercial real estate:
# Location: When investing in commercial real estate, the location has priority. A well networked project = better accessibility + more pedestrians. The investor / customer must carefully consider all liabilities and benefits that the location offers them.
# Title: It is extremely important to know the “name behind the project” and what it means. Above all, the “title” must be absolutely clear and transparent. One must do research with the help of a legal counsel to confirm that all information available regarding the title, history, background, privileges, obligations, etc. of the project / builder is clear.
# Land use: You have to make sure that the builder follows the established guidelines regarding “land use”. For a commercial facility, you can develop in a ratio of 30:70 (30% construction and 70% open space). For example: in the case of Golden I, only 27.6% will be built and the rest is open space to meet eco-friendly standards and create a space that feels alive, open and free.
# Land clearance / authority fees: Do your research and ensure that all payments relating to the property have already been approved by the builder / developer and that all ownership documents are in place.
# Building permits / NOCs / approvals: The entire project overview must be approved. Ensure that all government approvals / permits have been issued – construction plan / municipal permits, water and electricity authority permits, occupancy certificate, fire brigade NOC, aviation, environmental and environmental agency permits, etc.
Regarding RERA registration in particular, please note that it takes 1 to 3 months for a contractor / project to obtain RERA registration, provided all of the above NOCs have been submitted and approved. If a building contractor / developer has not received the RERA registration after a quarter, further research must be carried out before investing.
# Clarify permits in all areas of the project: Make sure that any land you plan to invest in is approved. In commercial areas, builders often sell areas / KIOSK areas that are mainly used for sales purposes. This is illegal and can cause a lot of problems. So it is best to be aware of this before making such a purchase. These rooms must also be registered and approved in the MAP.
# Date of ownership: As mentioned in RERA, always check the construction progress after your investment. Is it on the way to completion by the set and promised deadline? Please note: RERA only extends the delivery period in the event of “force majeure” and even in this case, if it is an unforeseeable circumstance, a maximum delay of only one year is permitted.
# Technical due diligence: An integral part of investing in a commercial project is to ensure that the property is thoroughly inspected to ensure that the structural quality of the project is on point – generator, elevators, HVAC air conditioning, plumbing, efficiency means carpeted / rentable Area, etc. You may need to hire a specialist company to do this.
(By Sudhanshu Rai, Director, Ocean Infraheights)
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