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    How to Analyse Commercial Property Investment in India 

    • 5 min read
    • Last Modified Date: February 6, 2024
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    Commercial Property Investment in India 

    • Real estate is perhaps going through its best ever time in India. In 2023, the Indian real estate investment market expanded significantly. According to Knight Frank, the market is currently valued at USD 265.18 billion. 
    • And when it comes to commercial real estate in particular, JLL India’s Real Estate Market report for Q3 projected substantial office space absorption of about 45 million sq. feet in 2024, easily surpassing the benchmark set in 2023.
    • It’s no well-kept industry secret that investing in commercial real estate is a great choice for substantial returns and yields. Commercial real estate is a strategic investment, but it requires a meticulous analysis of potential properties. 
    • In this guide we’ll delve into key factors and steps involved in analysing commercial property investment in India. 

    Understanding the Commercial Real Estate Landscape in India 

    • Before you even start diving into property analysis, its crucial to be aware of the broader market trends and dynamics.
    • Keep an eye on economic indicators, local regulations, and emerging business hubs to identify areas with growth potential. There are a lot of opportunities in India’s evolving business landscape: from bustling cities to emerging commercial corridors. 

    Location is Key 

    • The mantra of real estate rings particularly true for commercial properties: indeed, the location wields a significant influence on the desirability of the property and potential returns. 
    • Crucial considerations include proximity to transportation hubs; business districts – and most importantly – amenities. 
    • Mumbai, Delhi NCR, Bengaluru, Hyderabad & Chennai make up for more than 70% net office space absorption in 2023, as per Mordor Intelligence. 

    Market Research

    It is important to conduct thorough market research to understand the demand for commercial real estate in the particular location. Some important metrics to consider are: vacancy rates, absorption rates, and current rental trends. 

    Assetmonk’s commitment to transparency provides investors with comprehensive data and market analysis of our commercial property locations. 

    Type of Property And Usage

    Not every commercial property type is suited for every business need. Analyse the property you have in mind carefully: whether it’s an office space, retail outlet, or industrial unit. 

    Assess its compatibility with the current market demand. Assetmonk’s diverse portfolio allows investors to choose from a range of property types, providing flexibility and customization in their investment strategy.

    Financial Considerations in Commercial Property Analysis 

    Cost Analysis & Budgeting 

    Calculate the full acquisition cost: this encompasses not only the purchase price, but also closing costs and all essential renovations or improvements. Set a pragmatic budget – one that dovetails with your overarching investment strategy. 

    Through Assetmonk’s fractional ownership model, investors can enter the commercial real estate market for an entry fee as low as 25 lakhs INR; thus fostering financial accessibility.

    Cash Flow Projections 

    By estimating rental income and factoring in operational expenses, property management fees, and maintenance costs; we can evaluate the potential cash flow of the property. This is a cornerstone of delivering steady rental income to its investors. 

    What is the Potential for Appreciation? 

    As an investor, by analysing the commercial location’s historical trends and doing proper research regarding future projections, you can pretty accurately gauge the property’s  potential for long term capital appreciation. And if this is something that seems like a time intensive task, you can find industry experts and commercial real estate investment firms (like Assetmonk) to do it for you!

    The Importance of Legal Due Diligence 

    Title Verification

    The property must have a clear and marketable title. The ownership rights, who the title belongs to, all need to be clear and this is done by conducting thorough title verification. 

    In India, the Transfer of Property Act, 1882 & The Real Estate Regulatory Authority or Real Estate Regulation and Development Act (RERA), 2016 govern the sale & purchase of real estate. This is important, as it is through these laws that you get your rights as an owner of your commercial property. 

    Compliance & Zoning Regulations 

    It is absolutely essential to be aware of the zoning regulations of the particular city and state where you purchase your commercial property. Be aware, and ensure that your property complies with all the zoning requirements. 

    Exit Strategy for Commercial Property Investment 

    Risk Assessment

    Like all investments, there are some potential risks associated with investing in commercial real estate: Market volatility, economic downturns, or changes in local regulations. By having a diverse portfolio and a clear exit strategy that is flexible and provides for quick liquidation, you can mitigate these risks. 

    Assetmonk offers fractional ownership of commercial real estate where multiple investors pool their money to collectively own a property, thereby sharing the risk and mitigating it. This provides investors with added flexibility that they might not get with full ownership. 

    Exit Strategy Planning

    For full ownership of commercial real estate, you should have a clear, well defined exit strategy in mind: whether it’s selling the property, refinancing or leveraging the asset, and so on. A clear plan of departure is crucial because it not only maximizes returns but enables investors to follow a plan and adapt to uncertain market conditions. 

    For More Details read: Exit Strategies For CRE investments

    Bottom Line 

    For any successful investment, finding the right balance between risk and reward is key. Factors such as your risk tolerance, investment goals, desire for stable monthly income or long term potential goals, all play a huge role. 

    The best way to do that is by strategically planning out your investment strategy, and  creating space for a number of diversified investments in your portfolio. Striking the right balance helps investors remain confident even in the face of market fluctuations. 

    Assetmonk, a new age alternative investment platform specialising in commercial real estate and fractional ownership of high end commercial properties, is always ready to guide investors on their journey towards building a well-rounded and prosperous portfolio. 

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