Property investors prefer RoI over rental revenues
The RoI from pre-leased commercial properties is around 8-11%, while banks’ interest rates are at 5-7%
Hyderabad: Post pandemic, many people are looking towards fractional ownership of commercial realty as a smart investment option. Thanks to affordable asset value and sustainable source of income. Earlier, few companies used to offer such institutional grade commercial space with property management solutions and liquidity through resale. Now, multiple brands are doing this.
While the banks are providing around 5-7 per cent interest rates on long term fixed deposits, the branded commercial property developers are giving about 8-11 per cent return on investment (RoI). The investors need to check the track record of the builders as some of them claim to offer RoI up to 20 per cent in social media advertisements, which are not dependable.
Basically, the idea behind selling small unit sizes of the commercial property by a realtor is to acquire funds for development of the project at a lesser interest rate when compared to the banks and other lending institutions. Instead of putting their savings in the banks, the buyers invest in commercial properties to get a higher RoI on a monthly basis.
"Though this concept is not new, it is gaining traction after the Covid-19 impact on the salaries of middle-class. Today, everyone is looking to have a passive income and the commercial real estate allows that. However, there is a parallel demand for residential projects from the first time home buyers," said B Sunil Chandra Reddy, President of real estate body TREDA.
For those, who are interested to invest in commercial real estate, there is a wide range of options available these days. Apart from investing in real estate investment trusts (REITs) and Infrastructure Investment Trusts (InvITs), they can choose to put their money in office buildings, co-working spaces, high-end restaurants, luxury hotels and serviced apartments.
"If I invest in a second home for rental income, there will be certain expenses towards its maintenance at least twice a year. I chose to invest in a commercial property as I get better returns and there is no extra expenditure. Apart from the RoI, I also get capital appreciation," says Chandrashekar Reddy, who invested in Kapil Group's Kavuri Hub at Nanakramguda.
Expressing similar views, another investor Ramesh Vuppala said, "I have invested in World Trade Center (WTC) at Shamshabad. Right from the first month, I am regularly getting the RoI directly into my account without any delay. Except the TDS (tax deducted at source), there are no more deductions for the property management services." WTC Visakhapatnam is also coming up with the same concept. Hyderabad One, Mahaveer Gateway and SAS i Tower are some of the commercial hubs in Nanakramguda, Hyderabad offering assured monthly rentals as RoI to the investors. Shanta Sriram's Vasavi SkyCity in Gachibowli and Vamsiram Builders' Jyothi Granules in Kondapur also guarantee monthly RoI.
Other than these projects directly from the builders and developers, numerous tech-enabled platforms like hBits, Assetmonk, MYRE Capital, Property Share, Bhive, Invest Corner and Square Select Estates are offering fractional investment opportunity to their customers in premium pre-leased commercial real estate assets with low ticket sizes and personalised services.