Investing in commercial property is always a good idea if you’re looking for serious financial gains. Property owners can choose to open their own business or rent the property out to make a comfortable income. However, investing in commercial properties in India is a little complicated. This is particularly true for first-time buyers who are just stepping into the commercial real estate market. If you are new to real estate investment in India, here is a simple checklist that you can use.
#1 – What is the type of property purchase?
Buying property directly from the builder is simple and avoids a number of fees, like brokerage costs. You can take a loan and pay the builder like the Unitech Group. However, secondary purchases have a cash component and a check component that are subject to Indian tax regulations. The seller will tell you exactly how much to give in cash or check. This should then be listed clearly on the agreement, according to Zamanzar.
#2 – What is the construction date?
Properties that are more than 10 years old need a property inspection to ensure that they are shipshape. Checking the property is necessary to ensure that you do not end up with hefty repair bills or a complete collapse in a few years.
#3 – Do a little market research
Property prices are variable and commercial property rates tend to vary considerably. However, as these rates are double that of residential property rates, a little research is necessary to protect you. It’s highly recommended for you to do a little market research to determine the actual property price depending on location, customer traffic, rental rates for commercial properties, number of running businesses in the area, maturity of the area, and infrastructure provisions like electricity, roads, and water. All these factors will directly affect the property rate and the profitability of any business that opens on that property. With a market research report, you should be able to make an informed decision about the property and its rate.
#4 – What is the surface area?
Previously, many properties were sold based on carpet area. Now, builders use the term ‘super built-up’ to denote the area of the commercial property. According to Zamanzar, super built-up area is a marketing trick that is used by Indian builders that may actually indicate a property that is 20% to 40% more than the actual carpet area. You will have to compare rates and then calculate the real property price per square feet.
#5 – What is the possession date and what if there are delays?
Most builders quote a possession date but fail to stick to it. When this happens, you are paying more in the form of interest. If there are delays, the developer should be held liable for the delay in the form of fines or discounts. These fines or discounts should be listed on the registration agreement in advance and the lawyer should review the agreement to ensure that it is legally viable.
#6 – Check for extra charges.
Unscrupulous builders tend to tack on charges when they are handing over the property to the buyer. In the case of commercial properties, these ‘tacked-on’ fees can be hefty. Make sure you check for extra charges like car parking charges, maintenance charges, power backup facilities, infrastructure fees, and amenity charges and factor them into your purchase price. There might be more, so keep your eyes peeled and be careful.
#7 – Is the property clear of legal issues?
Most builders do their due diligence, but you have to do your research as well. Ask for the property papers and check them for the architect certificate, completion certificate, agreement draft, zoning applications and approvals, and municipal approvals states Mumbai77. If feasible, hire a lawyer to check the paperwork and ensure that your property choice is cleared of any issues.
#8 – How much rent can you expect?
This is very important for a commercial property. First-time commercial property investors may prefer to rent out or lease the property. However, rental rates for commercial properties tend to vary based on numerous factors. Do some research to find out what you can do for rents.
#9 – Will the property increase in value over time?
Real estate is normally considered an appreciating asset. The level of appreciation can vary based on numerous factors, and if there is a problem with the local market or economy, it can actually depreciate. But in general, all property appreciates over time.
#10 – Tax components
Commercial property investments may require special tax payments. According to Money Control, interest paid towards paying off your property loan can be tax exempt in certain situations. Definitely do your research about this, you don’t want to get stuck with unwanted taxes.
You can use this checklist to examine every real estate purchase you make as the essential parameters remain the same, usually. A word of caution; investing in commercial property can cost a lot more than residential real estate. If possible, hire a lawyer to verify the paperwork and check the legal aspects of the purchase before you invest in any kind of property.