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Commercial Real Estate Investing

Any investment involves the commitment of funds to investment alternative with an aim to generate income. Commercial real estate investment in India is involved in generating income through rental, lease or capital appreciation.  Real estate refers to immovable property, such as land, and everything else that is permanently attached to it, such as buildings. When a person acquires a real estate property, s/he also acquires a set of rights, including possession, control and transfer rights.

Understanding commercial real estate investment is crucial because it usually involves a substantial investment and a long-term one. Moreover, the commercial real estate market can be unpredictable, as there might be lack of buyers at one place and there may be pool of buyers at another place. Investors have many alternatives of investment in commercial real estate.

One can opt for real estate investment with an aim to rent the property. The owner earns a continuous stream of rent, but is responsible for paying the mortgage, taxes and any costs associated with maintaining the property. The owner also benefits from capital appreciation over the period of time. With the aim of renting the land, owner runs the risk of not finding a tenant and could suffer negative monthly cash flows, with mortgage payments and maintenance expenses still to be borne. One with the aim to gain only capital appreciation over the time and then selling it again then investor should have strong patience. With such aim generally huge cash is locked at one place for a long period.

Rental properties in India can be purchased with borrowed funds. This means that you can purchase a rental property by putting down only a percentage of the total value. Essentially, you can control the whole property and the equity it holds while only paying a fraction of its total cost. Also, the property you purchase secures the debt rather than your other assets.
Although commercial property investment has higher returns than residential property, the risks associated are usually higher as well. The main risks involved in commercial property investment are:

Capital intensive – commercial property can be very expensive, and hence depend on the quality of your investment. There is less room for diversification within the sector unless you have large amounts of capital at your disposal.

Tenant default – although the rental income from commercial property is high, there is always a risk that the tenant will default on the lease. This is increasingly becoming a problem, with many tenants defaulting on leases as they go out of business due to high level of competition. However, it is possible to regain the income stream by re-renting the property, but this can take time and can stop the flow of funds.

Low liquidity – the value of commercial property can be greatly affected if you need to sell quickly.

No definite value – because property prices are generally decided by the opinions of experts and not the pure market forces of supply and demand, the property has definite value. The only way to truly know what the property is worth is by selling it. This means prices can fluctuate fairly often, and this may mean that you can lose money when selling.

Despite of so many risks involved in commercial property investment, it is still one of the most profitable investment sectors. If you find the right commercial property investment, you will get a good return from your investment.

Pacifica Companies Pvt. Ltd., is one of the leading real estate developers in India following such constructed procedure to finalize the deals to avoid the later discrepancies.  We offer a wide range of future opportunities of commercial real estate investment in India. We specialize in providing the best deals for your commercial real estate projects and residential real estate projects like apartments, bungalows, townships etc. Invest on commercial projects or residential schemes in India and you are definitely going to enjoy the continuous cash flow yielding maximum returns on your investment if dealing with Pacifica – a leading real estate development company in India.


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