Benefits of investing in Commercial Real Estate
    Article16th Jun 2021
    3 minute read

    Benefits of investing in Commercial Real Estate

    As we live smack in the middle of a new era, we’ve had all had at least one moment when we have looked back and seen how far we have come from the year 2000. The Internet has taken almost everything, earning money has become as tough as it could be. Competition for almost everything is increasing day by day. Adding to all this, inflation is through the roofs. Therefore, the need for wise investments has risen exponentially in the current era. A source of passive income has become a need of the hour. This is where Preleased Commercial Real Estate comes in.

    Pre-leased Commercial Real Estate provides stability to our investments by being a hedge for inflation, providing monthly rental income, capital appreciation, financial stability, and most importantly mental peace.

    Similarity to other Asset Classes

    The pre-leased commercial real estate also has characteristics similar to a bond-like and equity-like investment. The rental income is analogous to the coupon payments and the capital appreciation at the end of the lease is uncertain similar to that of a stock. I believe that real estate being a relatively illiquid alternative investment product should give out yields greater than the market. Along with this risk, pre-leased commercial real estate stands at a higher liquidity level than other real estate properties. Adding the cherry on the top, the average total return has been better for the real estate market as compared to traditional investment products.

    commercial property

    Key Benefits

    There are many more benefits of Pre-leased commercial real estate like zero waiting period - in the sense that since a preleased commercial property is already given on lease and fetching a regular rental income, there is no waiting period for the buyer to earn a Return on Investment (ROI). The moment the lease deed is transferred, the ROI begins the very next day. Moreover, the value of preleased properties appreciates over some time. And, if it is located in a premium location or has good infrastructure, design and amenities, then the capital appreciation can go even higher. The buyer can enjoy a good capital appreciation on preleased properties, provided they keep a horizon of at least min 5 years.


    Ease of Investing

    Real estate investment has long been dominated by large players such as pension funds, insurance companies, and other big financial institutions. Thanks to the globalization of real estate investing and proptech, there is now a trend towards real estate being more accessible to retail investors.

    Therefore, many retail investors who have not considered real estate allocations for their investment portfolios fail to realize that they may already be investing in real estate by owning a home/office. Not only do they already have real estate exposure, but most are also taking additional financial risks by having a home mortgage. For the most part, this exposure has been beneficial, helping many amass the capital required for retirement and diversifying their overall portfolio.

    If you have not thought about it or have felt that real estate investment has been an opaque industry in India, you might be correct. But due to the uprise of technological adoption in real estate, real estate sector is becoming more transparent! With real estate companies leveraging technology, there is no question that rent-generating commercial real estate is the asset to have in your portfolio.

    Raghav Gupta
    Investment Relationship Team