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Owning a piece of land, whether residential or commercial property, is not only a mark of prestige in India but also a promising investment. While many investing strategies are still recovering from Covid-19's unexpected impact, the real estate investment sector has continued to expand and flourish. The industry is likely to increase significantly in the future, as many investors are opting for real estate investment.
This path to riches, however, is not a cakewalk. An investor must commit a significant amount of money as well as time to reap all of the benefits that come with it, including higher returns. The most important stage of owning a property or investing in a commercial property, among many others, is identifying the potential of a property to determine its value, which is a challenging task.
As the real estate market is booming in India, millennials are participating to make a fortune. With the Government of India releasing draft guidelines for investment by Real Estate Investment Trusts (REITs) in the commercial real estate segment, there is a sense of reliability and safety when a retail investor steps into the CRE market.
However, making the right purchase requires knowledge of the property's fair market value. Is it too expensive? If that's the case, what's the reason behind it? Is it going to be a good investment? As an investor, you should seek answers to these questions before making a purchase of a property. The process may seem overwhelming, but don’t worry. With that being said, PropReturns has curated a checklist of factors that affects pricing and the value of a property in India.
Although there could be multiple other driving factors related to a specific property, the below-listed factors could be considered for any kind of property. So, let’s dive straight into it!
One of the most significant elements impacting a commercial property value is location. Other elements that influence a property's value, from its location perspective are:
How close it is to civic amenities like recreational, entertainment, and shopping centres, as well as airports and hospitals
Opportunities for employment
Infrastructure quality in the area
The area's security systems
Buildings, real estate, and properties in business and market sectors have a higher value than their residential counterparts. Buildings in well-built and approved colonies and neighbourhoods typically command a greater price than those in less developed and forthcoming places. Similarly, structures built on freehold ground tend to attract a higher price than those built on leased land.
For example, according to JLL India, in the third quarter of 2021, India's net office absorption reached 5.85 million sq. ft., up 8% YoY in key cities. Three cities - Delhi-NCR, Mumbai and Pune - accounted for ~62% of the total volumes recorded in the quarter.
Property valuations are higher for properties with better infrastructure and modern amenities than for properties that lack proper electric connections, telephone lines, water sewerage facilities, and all other infrastructure such as community centres, parking lots, access to public transportation or general stores.
This leads to the idea that property near entertainment hubs, medical facilities, educational institutions, retail markets, and corporate areas, as well as other day-to-day amenities, is valued higher. Property valuation is clearly based on the availability of essentials and amenities associated with decent living quarters.
Transportation is indeed important in many circumstances. It can make or break a business. It is common knowledge that one of the most critical needs for investors wanting to purchase land or property is connectivity.
If your commercial space is well-connected to public transportation, it can hold significant appeal for working professionals who are just starting their careers or saving up for other investments. The higher the value, the more tied it is to many modes. Owning a car can be very expensive in the long term, so having public transportation right outside your door can be very appealing.
The condition of the potential property is undoubtedly one of the first questions that will be asked. Is it a new property or an older one that has been passed down for decades? Buyers will scrutinise the property for any repairs or patchwork that has been done, which might lower the value.
If the property has been remodelled, it could be a positive thing or a terrible one, depending on the current fashion.
The graph depicting property worth shows a slower rise in locations where there is enough land accessible for real estate development than in areas where land is comparably scarce.
Property value is directly proportional to the amount of disposable income held by the buyer or the majority of the population in the area.
The supply and demand for real estate in a given location are inversely proportional. Property valuation rises as the supply or availability of real estate declines.
Population shifts are the primary drivers of demand. The popularity of a certain locality in terms of people desiring to be a part of the locality boosts its price along with an increase in the number of people residing in it.
The expense incurred by the owner in the process of enjoying or maintaining a property is referred to as affordability. It is the word that establishes a link between interest rates, property values, and earnings in layman's terms.
If any of the three variables above reaches its maximum level in a given location, the property owner begins to hunt for a better living elsewhere.
The above-listed aspects and a few more others lead to an escalation in the ultimate price charged to the buyer. Before making a real estate investment Mumbai or any other Indian city for that matter, investors should conduct an analysis of these drivers to get a fair valuation of the property that interests them.
To provide a little help to those who want to make a fortune in Commercial Real Estate, PropReturns has created a list of verified properties. The online hassle-free platform gives access to the data and insights of commercial properties available for investment and sale across Indian cities.
Be it real estate investment Mumbai or Navi Mumbai or Delhi, investors can check out the verified details uploaded on the platform. All you need to do is visit PropReturns and check out the property that fits your bill while aligning with your investment goals.
Real estate investments in South India's these top 4 cities are worth every penny spent! Bangalore, Hyderabad, Kochi, and Chennai are prospering in real estate developments. South India's economy is growing at a rate of 8% every South India is leading in infrastructural developments, education, lifestyle, stability, and many more factors that can flourish one lifestyle as well as wealth. With the availability of land which is affordable and a great IT, dominance has outpaced the real estate development of Northern cities of India. Let's look in-depth to know more.
Property loans are an epicenter of real estate investments in India. Commercial property loans like loans against commercial properties, and LRD loans are the most crucial and beneficial loans in commercial real estate. These loans provide benefits like lower interest rates, long loan tenure options, leverage, limitless borrowing amount, and an easy application process that helps one to apply for these loans ease. As compared to other traditional loans, these loans offer a lot of repayment options and also help build leverage. We have explained in detail the pros and cons of conventional loans and how commercial loans raise a bar over other property loans in India.
Investors are hurrying to invest in residential as well as commercial properties. Even after the pandemic waves, these cities have continued to grow in terms of the real estate sector. Mumbai, Delhi, and Bangalore have become high-rated real estate investment hotspots. These cities assure long-term stability to the investors with impressive real estate performance. Bangalore is known as the silicon valley of India, Delhi as the commercial hub, and Mumbai as the financial capital of India these cities hold a great scope for the investors.