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Tips to invest in office property

With the residential market still in a droop, investors looking for regular income, could consider putting their money in commercial property Gurgaon.

The residential market keeps on seeing a log jam yet commercial real estate has turned around, thanks to the improvement in business sentiment since last year. Traditional sectors like IT-ITeS, banking and financial services, continue to stimulate the demand for office space. Presently, innovation companies and tech companies, have also provided a big fillip to the segment. According to a recent report from Knight Frank India, there is a shortage of high-quality office space in Mumbai, Delhi-NCR, Pune, Bengaluru, Chennai and Hyderabad. The demand has been exceeding supply since 2014, leading to rentals firming up in several locations.

For those interested in regular income, office property is a better bet than the residential kind. Leased office space yields as high as 8-10% annually, whereas, the yield from residential space is a meagre 2-3%. In addition, there is the capital appreciation (although admittedly lower than residential property). There’s also the standard deduction of 30% on your rental income for repair and maintenance. Do keep in mind that income from leased offices, can act as a hedge against inflation, since in most years, you can hike it from 5-10%.

However, investors should remember that investing in an office space usually requires much more money than residential property.

 

Risks

The risk relies upon the phase at which you contribute. When the property is under-construction; when it has been constructed but not let-out; or when it has been finished and furthermore has an occupant. You procure the most elevated capital increase by contributing at the main stage yet contributing at that point additionally conveys the most elevated hazard. It is most secure to put resources into a building that is finished and leased. Another danger of contributing in office property, is that your building may stay empty after an occupant’s rent has lapsed. This hazard is additionally expanded amid financial downturns.

 

Deceitful schemes

Investors should be wary of the various plan such as the assured returns one. There is always a big risk associated with Assured return – Whether the developer will continue the payment or the cheque will get bounce. For this always assure first that whether they are providing the option of Assured Return with Bank Guarantee.

Due diligence

Bet on an area that is financially energetic and will keep on attracting business. Research the supply that will come into your region when the building will be prepared for occupation.

 

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