Given that crypto markets are on shaky ground and the stock markets too are wobbly, the third obvious option for investments remains - real estate. What sort of real estate should you put your funds in for growth? While most people tend to opt for residential property as a second home which they plan to put on rent if they want, consistent and fast returns, commercial real estate could be a better option.
The fast growth of the commercial segment is fueled by the spending habits of the young urban Indians:
Nayan Raheja, Raheja Developers said, “Retail real estate sector is growing at a rapid pace. India as a country with its young hardworking population is ready to roar and most of them are willing to spend. The question obviously arises where will they go and spend? For daily needs, it’s the neighbourhood shops and for recreational shopping, the choice is a mall. For a savvy real estate investor, the picture is crystal clear. If you expect high appreciation on your investment or for that matter even high rental value compared to an apartment, a shop is the first choice. Besides, as entrepreneurial culture is seeping into the psyche the demand for shops is only going to soar high.”
Why invest in a shop: 5 reasons
1. here are multiple reasons why one should invest in commercial property if one is looking for a second investment; primarily because unlike residential property, a shop can be put on rent from day one. The rentals of a shop are much higher than a residential property, which means that you will earn more in terms of a shop than a residential property of the same size.
2. Unlike residential properties which are high-maintenance and require you to support the tenants, a shop has much less in terms of maintenance hassle. Once a retailer takes up a shop on rent, the interiors and accessories are often done to his taste – the owner's responsibility in the maintenance of the interior is much less in the case of a shop.
3. Shops will always be in demand and organized retail in India will continue to expand for time to come, feel market experts. The spending habits of the young urban Indian show how retail will continue to thrive in urban centres. A shop in a good location is always going to be in demand and returns on investment are likely to sustain for long. A shop thus is a source of high-value passive income for the long-term.
4. In case one wants to liquidate a property for any contingency, selling a shop is much easier than selling residential property. A shop in a good location is always going to have high value as compared to a residential property.
5. Also, in case one wants, owning a shop also means that one can start his own retail outlet. This means, that investing in a shop early on, could also help one prepare for a second or third income in the more advanced stages of life.
Overall, it is boom time for Indian retail real estate and realtors are optimistic about its future. Amit Jain, Director, Mahagun Group says, “Indian retail market is estimated to reach $1.1-1.3 trillion by 2025. In 2019/20 it was valued at $0.7 trillion, which makes for a CAGR (Compounded Annual Growth Rate) of 9-11 per cent. It is driven by socio-demographic and economic factors such as urbanisation, income growth, and a rise in nuclear families. Undoubtedly, an investment in real estate in any form including in residential apartments will yield a good return in the long run. But if someone is looking for a high return vis-à-vis the capital invested, shops make for the best choice. First and foremost, the entry cost is relatively low. The rental value and price appreciation are also equally high. It is estimated that the average rental income of the residential real estate is 1-2 per cent while that of commercial real estate reaches a staggering high of 8-12 per cent thus offering 3 times higher yield.”
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