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What are the Best Options for Owning Real Estate? | hBits Blog

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What are the Best Options for Owning Real Estate? | hBits Blog

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Take a look at some of the best real estate ownership opportunities like fractional commercial real estate, REITS, etc. that can earn maximum returns.

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Throughout history, owning real estate has been one of the best vehicles for wealth creation. In fact, canny real estate investments have generated the most number of millionaires and billionaires in the past two centuries. These investments may take the form of ownership of land, buildings, infrastructure facilities such as railroads and ports and other permanent structures. Investment in real estate yields two kinds of passive income - the gradual appreciation of the property value, and the periodic income from rentals and other such agreements. Moreover, such investments also offer a host of tax advantages.

Real estate investments tend to be capital intensive and long-term; they require a hefty initial outlay and are dependent on cash flows. Each property has a unique set of pros and cons and tends to be illiquid in general. Until after Independence, such investments were restricted to the uber-rich, who could absorb such inherent risks. However, since then, several new investment avenues have opened up for those interested, and involve the pooling of resources from multiple individuals to acquire property, and sharing the returns among them. Let's take a look at some of the best real estate investment and ownership opportunities
Real Estate Investment Trusts
Real Estate Investment Trusts (REIT) are ideal for those looking to invest in real estate while avoiding the high attendant costs of maintenance. They allow individuals to diversify their portfolio without holding physical assets. Similar to mutual funds, REITs invite a number of individuals to pool their money together, which are then applied to acquiring and maintaining certain properties. Investment and management decisions are taken by experienced asset managers. The returns are distributed among the investors. The investor can liquidate his position at any time by selling his units of the REIT. REITs offer transparency, liquidity and do not charge investors unduly high fees. The first REIT in India, Embassy Office Parks REIT, got listed on 1st April 2019.
Real Estate Exchange Traded Funds
Real estate ETFs invest in the real estate market, primarily in REITs. Again, they are a great option if diversification into real estate is the aim. ETFs have an overall low cost of ownership since they are managed passively by a trust company. Real estate ETFs may invest in shares issued by REITs which in turn purchase commercial buildings, office spaces, hotels, and sometimes even residential condos. These funds are not yet available in India. There are several real estate ETFs in the market worldwide and an investor ought to properly research and consider all possibilities.
Direct ownership of Real Estate
Direct ownership of real estate requires a hefty investment amount, as well as in depth knowledge of the local real estate sector - the location, upcoming infrastructure projects etc., all of which may potentially increase or decrease the value of the investment. Direct ownership may be categorized into ownership of commercial or residential real estate. Among the two, commercial property has been known to provide both higher and steadier returns over the same period of time. Here, returns refer to a combination of annual lease rent as well as the capital appreciation of the asset per annum. On an average, residential properties attract two to three percent returns per annum, while in case of commercial properties up to twelve to twenty percent returns per annum are possible. In India, the prime cities to invest in commercial real estate are Pune, Chennai, Hyderabad and Bangalore where IT industry is predominant and constantly demanding more office spaces.
Fractional Ownership of Commercial Real Estate
This is an attractive option for individuals who have experience but are branching out into real estate for the first time. The first of its kind in India, this route allows for ownership of a hard asset for as low as Rs. 10 lakhs. The individual has total control on the type of properties he may wish to add to his portfolio. Location, type, and value are all valid criteria. By creating a market for a share in a property, such options allow for a seamless entry and exit into the real estate sector. The property manager takes proper care and maintenance of the asset as well as collect rentals from the tenants. The individual can make informed decisions based on real-time data generated. Also, the property worth is evaluated frequently. Monthly rentals from the portfolio of real estate holdings are secured which ensures passive income while eliminating risks and hassles.

Real estate can prove to be tricky territory for the uninitiated. But with experienced and skilled management, they can turn into an opportunity like none other. Fractional ownership of Real Estate is a fabulous option to diversify one's portfolio, maximize income and reduce risks. Investors are encouraged to make an informed choice and venture into a fractional ownership of the real estate to realize attractive yields.

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What are the Best Options for Owning Real Estate?

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Throughout history, owning real estate has been one of the best vehicles for wealth creation. In fact, canny real estate investments have generated the most number of millionaires and billionaires in the past two centuries. These investments may take the form of ownership of land, buildings, infrastructure facilities such as railroads and ports and other permanent structures.

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Impact of Covid-19 on Commercial Real Estate | hBits Blog

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Impact of Covid-19 on Commercial Real Estate | hBits Blog

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Read how the impact of Covid-19 on commercial real estate sector is perceptible.

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Pandemics require tremendous societal effort to contain, but in its wake can have destabilizing effects on the economy. The United States Federal Reserve Bank has cut interest rates by half a percentage point. The European Union is contemplating a half a trillion-dollar monetary insertion, in attempts to boost market sentiment. Pandemics are infrequent, but unpredictable and out of control With Covid-19 sweeping the world, sending entire countries into lockdown, the economy is taking a severe beating. Already the UN estimates that the outbreak will cost the world up to USD 2 trillion in 2020 bringing global growth to under 2.5% this year.

In India, the Sensex, which closed at 41,565 on 12 th February fell to 29,915 by 20 th March, losing over 11,000 points. In these volatile times people tend to look for options with higher degree of safety and stability like bonds and commercial real estate.
Fallout on Commercial Realty Sector
The effect of Covid-19 on commercial real estate has been perceptible but muted. The sector has been on a high-growth path for the past three years, with gross leasing activity at 25% year-on-year in 2019. The current year was expected to be equally good, but the coronavirus scare could finally rein in growth causing a temporary slowdown in the sector.

Current trends seem to suggest that delayed decision-making and reduction in capital expenditures may lead to the deferment of deals by three to five months affecting the sectoral growth rate. Many new deals are stuck with key decision-makers unable to conduct any business owing to travel restrictions. Simultaneously, numerous parties have postponed transactions and decided to adopt a wait-and-watch policy. Reports also suggest that the number of enquiries and site visits have declined. Currently, only pre-committed deals are going through on account of those being ratified at an earlier date.

However owing to the prevailing lack of supply of Grade A office space, the sector is still expected to continue to grow, albeit at a lower rate. Specifically those developers or investors with exposure to already rented out space will see their property appreciate, as capital will flow to safer yield generating assets.
A Bright Spot in Commercial Real Estate
When it comes to investing in commercial real estate, one should do an in-depth due diligence along various parameters to ensure turbulent times like these have little impact on your portfolio properties. Properties which are under construction and already going through liquidity crunch due to economic slowdown are expected to be the worst hit as work will be stalled and cash flow would be diminished. Similar situation can be seen with vacant properties also as new rental commitments might get deferred for three to six months. Only pre-leased properties have witnessed the least impact of COVID-19, as even though companies work from home, the pre committed rentals will be paid as per leave and license agreements. Also, premium commercial properties have clear advantage in this scenario as tenants are typically MNCs or large corporates with strong business fundamentals and sustained cash flows to service the rentals.

Owing to these factors, commercial real estate is still bringing rental yields in the range of 7-9% on Grade A commercial assets and the performance is expected to sustain in the near term. Customers looking for safe haven for there liquidity should keep an eye for pre-leased properties in the market. Here rental income is assured as the properties have already been rented out with strong rental agreements in place. The deferment of deals and slowing of business cycles have little effect on them. Pre-leased properties will bring guaranteed returns in the near to medium term countervailing the volatility in the stock markets and adding some solidity to your portfolio.

However, it is important to choose well if you are planning an exposure to pre-leased commercial property. As location is a critical factor in the commercial real estate business, be very sure that the long-term forecast for the location is positive. You should also pay attention to things like quality of construction, cost of maintenance and the credibility of your property manager. Finally, your aim should be to choose a property with good quality tenants demonstrating sound financial health and a zero-default track record to ensure healthy returns.

Owing to the factors outlined, customers holding liquidity should look for safer havens like pre-leased commercial property or government bonds to earn stable and healthy monthly income.

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Impact of Covid-19 on Commercial Real Estate

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Pandemics require tremendous societal effort to contain, but in its wake can have destabilizing effects on the economy. The United States Federal Reserve Bank has cut interest rates by half a percentage point. The European Union is contemplating a half a trillion-dollar monetary insertion, in attempts to boost market sentiment.

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How to Diversify Your Portfolio in 2019-2020? | hBits Blog

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How to Diversify Your Portfolio in 2019-2020? | hBits Blog

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Learn how to diversify your portfolio from options like fractional commercial real estate, mutual funds, equity etc to earn maximum returns in 2019-2020.

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For an individual, arriving at a formula that maximizes returns while minimizing risks is much like locating the Holy Grail. Unfortunately, this is an equation that changes with several factors - performance of markets, industry cycles, individual risk profiles et al, the elusive quest never really concluding. One sure way, however, of mitigating portfolio risk is through diversification.
Equity
Equity remains a popular investment option with individuals of all types. Since the value of equity assets largely depends on market factors outside of one's control, it makes for a highly volatile investment route.
Mutual funds
Mutual fund is well suited for individuals with cash in hand, but limited knowledge of the working of share markets. A mutual fund offers security against market fluctuations by pooling money from different individuals and parking it in various equity or debt instruments. The basket of investments is carefully managed by experienced professionals in exchange for a fee. Similar to equity, the value of mutual fund depends on market factors which makes it a volatile investment.
Debt instruments
In India, investing in a debt instrument is considered the least risky, and is consequently the most popular option. Investing in debt instruments such as fixed deposits, National Savings Certificates (NSCs) and Public Provident Fund (PPF) protects the investment portfolio from the volatility posed by equity and mutual fund investments, and so offsets risk. Debt instruments have two primary characteristics - a regular but fixed mode of income, and guaranteed safety of the principal invested. However, playing safe almost ensures that returns never get a leg up over taxation and inflationary pressures.
A hot new option - fractional commercial real estate
Real estate continues to be the one option that can turn a canny individual into a millionaire the quickest. In fact, most high net worth individuals across the globe have maximized their wealth by owning real estate. The fly in the ointment is that an individual must carefully vet the property under consideration. This is time consuming, cumbersome and could easily go wrong due to lack of expertise and experience. Post-purchase, the asset needs to be owned and managed which is time-consuming as well. This clearly makes for a stressful proposition.

A viable new alternative is to own fractional commercial real estate. Here, the money from various individuals is directly invested in a property, mostly commercial. This option allows an individual to seamlessly enter and exit the asset without the hassles of ownership process. Hence, an individual can bypass the illiquid nature of real estate ownership. It should be considered as a great long-term option and is a relatively new addition to an Indian's portfolio allocation
What are the benefits of managed commercial real estate?

Secure monthly rental payments from strong credit rated tenants

Tenants fund the furnishing and fit-outs of premises which ensures tenant-asset stickiness

Contractual rental yield + potential appreciation of 12% to 20% due to rental escalation and market appreciation

Minimum downside risk due to hard asset ownership compared to any other asset classes

Unique investment to diversify portfolio consisting of traditional equity and debt instruments

All the expenses for owning an asset are bare minimum and predictable

The individual is ultimately responsible for building a well-performing and diversified portfolio so making an informed choice is crucial. Choose fractional real estate as a rock-solid option for your portfolio.

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How to Diversify Your Portfolio in 2019-2020?

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For an individual, arriving at a formula that maximizes returns while minimizing risks is much like locating the Holy Grail. Unfortunately, this is an equation that changes with several factors - performance of markets, industry cycles, individual risk profiles et al, the elusive quest never really concluding.

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Best Ways to buy Real Estate in India | hBits Blog

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Best Ways to buy Real Estate in India | hBits Blog

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Checkout how people with less funds can buy commercial real estate in India with options like fractional ownership, RIETs, and real estate funds.

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For decades now, India has had a steady obsession with owning real estate - a fact that was quantified by the country's central bank in a report titled Indian Household Finance. In the report, the Reserve Bank of India stated that an average Indian household holds a staggering 84% of its wealth in real estate, whereas only 5% of its income was tied to financial assets such as stocks, bonds, and deposits. The unwavering faith in realty is not surprising mainly owing to two reasons: real estate is a tangible asset and not merely a piece of paper, and secondly, most Indians have previously witnessed healthy appreciation in property prices in the long run.

In recent years, the real estate sector may have hit a few stumbling blocks for various reasons, but our enthusiasm to invest in properties has remained intact. Despite headwinds in the form of global economic slowdown, sluggish job market and demonetisation, The Economic Times recently surveyed 2,700-odd respondents to find that nearly 57% of them still found real estate to be the ideal investment destination. The vote of confidence comes in spite of property prices either going up or remaining stagnant in the last decade-and-a-half. That's mainly because the realty sector has diversified itself in recent years and is now more accessible to all kinds of investors - big or small.

So, let's take a look at all the investment options available to us so that we can make the right choice when it comes to investing in a property.
Residential properties
For most of us, when we say we are investing in a property, it means we are buying a home to move in. That makes sense because you can't beat the emotional security of owning your own house. The other upside is that you can put up your home for rent. This way, you are assured of getting a stable income every month.

But the problem is that you need a large amount of money to buy a residential property. And even if you want to rent the property, it may take time to find a tenant. Many a times, the turnover of tenants can be very high because they often decide to shift homes after some time. You should also calculate the rental yield of the property

Selling a residential property can be cumbersome too. It is not easy to find a buyer, and if you are in financial difficulty, you may be forced to sell the house at a lower-than-expected price.

Moreover, selling the property can be especially tough if the house is not situated in the best of localities. But then again, to buy a house in a plush locality can cost you a lot more. You may decide to take a larger loan from the bank, but it is important to note that a possible rise in lending rates could skewer your financial stability in the future.

Relatively easier to buy

Huge up-front cost to buy residential property

Sense of emotional security

Not easy to sell

Capital appreciation over long-term

Rental yield is not very high

Stable rental income

Can be tricky to get desired tenants

Loan repayment is tax deductible

Interest rates can potentially increase

Requires high maintenance

Price could remain static for some time

For those still interested in buying a residential property for investment purposes, there are two other options available to them.

Property flipping: In such a case, you can buy a residential property, spruce it up by adding modern features and then sell it for a higher price for a quick profit. However, you should do this if you understand the property market well. Factors such as the acquisition price, renovation costs, location - among others - play a crucial role to succeed in this business.

Managed properties: Buying a residential property adds to your responsibilities. If you are not interested in dealing with day-to-day operations, and finding and dealing with tenants, you can hire a property management company to do so. But the flip side is that you need to pay them for their services, which means your rental income is on the lower side.

Commercial properties
Commercial real estate costs a lot more than residential properties.

Does that put you off immediately?

While it may be true that upfront investment to buy commercial realty is a lot higher, this popular notion is changing rapidly. These days, salaried professionals are starting to put their skin in a game that, for long, was exclusively accessible to the rich. The reason? Emergence of flexible and feasible financial options. No longer does one have to put stacks of money upfront to buy commercial real estate anymore.

Before we mention the different ways to buy commercial real estate, let us quickly run through the reasons why investing in commercial real estate may be the best financial decision you may take.

High rent
A good commercial property can fetch you an average rental yield of 6%-10%. On the other hand, a residential property gives a lowly 1.5%-3.5% yield. This means that the rent on a commercial property investment of Rs 25 lakh would be anything between Rs 1.5 lakh and Rs 2.5 lakh every month, whereas rent from a residential property wouldn't generally exceed Rs 87,500 per month.

Stable returns
Lease agreement for commercial properties is generally between five to 10 years. The tenant stays for the entire duration. But that's not the case with residential properties. Tenants switch homes more frequently.

Surging demand for office space
Office space is rapidly increasing in India due to surging demand. As per an Anarock report, office space will grow by 13% in 2019. So, if you are looking to make an investment, putting your money in office space now would be ideal.

Quality of tenants
Unlike the risk of letting in "bad tenants" into your residential property, commercial real estate automatically invites reputed businesses such as banks, IT firms and retail stores. This assures you timely payment of rent and little fuss.

Lower maintenance
Businesses tend to furnish commercial properties as per their taste. This means a commercial landowner doesn't need to spend money on interior design.

Shields you from economic slowdown
You won't be affected by the performance of the economy because you'd continue receiving rent nonetheless.

The disadvantages of buying a commercial property are higher loan interest rates and no tax benefits when compared to residential home investment. But the rental yield is so high in case of buying a commercial property that it can negate these shortcomings in the long run.

Coming back to how you can afford to buy commercial real estate, here's the lowdown:

Fractional ownership: Under this model, a group of owners can come together to buy a commercial property. For example, if a warehouse, office or retail space is valued at Rs 2.5 crore, ten individuals can each pay Rs 25 lakh to acquire the property. This allows individuals to co-own commercial properties at an affordable rate and at the same time, allows them to enjoy all the perks of owning this type of real estate.

In short, fractional ownership allows individuals with less funds to put their money in big-ticket properties.

Still at a nascent stage in India, there are a few marketplaces like Mumbai-based hBits who have forayed into this business. And with rising demand for office and retail space - office space absorption is likely to hit a record high of 42 million square feet by the end of 2019 in the country, as per property consultants JLL India - individuals would view this as an opportune moment to own before the market reaches a saturation point.

Additionally, some of these tech-driven marketplaces offer the benefits of commercial land ownership without the headaches of day-to-day practicalities. That's because these companies have professional teams who are responsible for:

Finding tenants for you

Managing the property

Doing due diligence

Completing government paperwork

Providing post-sale support on your behalf

To know more about hBits and how you can have ownership in commercial realty, click here.

REITs : Real estate investment trusts, or REITs (pronounced at reets), are popularly known as "real estate stock" - and with good reasons. They work very similar to how shares work in a stock exchange. The only difference between buying a company stock and a REIT stock is that with the former, you become a partial owner of the company, whereas with the latter you own a small part of commercial real estate like warehouses, hotels, resorts, shopping malls and office spaces.

However, the flip side with investing in REITs is that you don't get to choose the commercial property you want to own, unlike with fractional ownership. Moreover, the REITs ownership is only a piece of paper, whereas with fractional ownership, you actually invest in a tangible asset. Like with stocks, REITs can be volatile because they are market-linked and speculative.

Real estate funds: These are a type of mutual funds which allow small investors to buy stocks of real estate companies. While they are an alternative to buying a property and are highly liquid, this vehicle - just like REITs - suffers from the fact that they are prone to flounder when the real estate sector doesn't perform well.

To sum up, real estate ownership no longer costs you an arm and a leg. This is especially true for commercial property investments. With the advent of new and affordable financial options, a small investor can now aspire to buy the more lucrative commercial properties.

In fact, a model like fractional ownership helps individuals to actually "own" commercial estates! Better still, unlike REITs and real estate funds, fractional ownership helps you focus on one property instead of merely diversifying your money across various commercial estates - and thereby diluting your returns. To know more about fractional ownership of commercial properties, click here.

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For decades now, India has had a steady obsession with owning real estate - a fact that was quantified by the country's central bank in a report titled Indian Household Finance.

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Commercial Realty: Way To Build Wealth For NRIs | hBits Blog

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Commercial Realty: Way To Build Wealth For NRIs | hBits Blog

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NRIs can build wealth by being a partial owner of commercial real estate properties across India at a small ticket size with help of fractional ownership.

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Commercial property has become one of the hottest investment assets for NRIs in the recent past. A rapidly developing economy, growing urbanization, the depreciation of the rupee, the establishment of RERA, which increases transparency in the realty sector, attractive rental yields, and good value appreciation potential are some of the factors that are driving this trend.

With government rules now allowing NRIs to freely purchase property except farmland and plantation land, the real estate sector has witnessed considerable wealth inflow from the Indian diaspora. A report by real estate consulting firm 360 Realtors notes NRI investments in the sector doubled from $5 billion in 2014 to $10.2 billion in 2018. Meanwhile, a consumer sentiment survey by ANAROCK for the first half of 2019 reveals a special preference for real estate among NRIs, with 63% of them opting for property over other assets.
Residential real estate versus commercial real estate
The residential real estate sector in India is currently undergoing a slowdown. In this scenario, commercial real estate has emerged as a winning investment option for NRIs, promising returns in the range of 12-20% (contractual yield + appreciation potential) annually. The high demand for premium office spaces in India is also prompting foreign investors such as Blackstone, Brookfield, and Xander to enter the commercial real estate space. A number of high-value transactions running into thousands of crores of rupees completed in the past year attest to the bullish outlook in the market.
Investing in commercial real estate: The brass tacks
NRIs must be extremely careful while purchasing commercial real estate in India. It is easy to lose your way in the labyrinth of paperwork associated with a property purchase in this country. There are many factors to keep in mind in this regard. Three important ones are:

a) Location: Choose a location where there is a high demand for office space. Failing on this front would mean difficulty in getting good tenants and low rental yields. Location is also important in determining your interest rate from banks.

b) Due diligence: Ensure that all papers, permissions, and approvals are in order. It is a good idea to check the credentials of the developer, construction quality, access to transport and infrastructure, and so on.

c) Income and expenditure: Closely examine the cash flows, management costs, property tax, cost of insurance, lock-in period, capital appreciation, and so on.
Real estate ownership made easy
The hBits fractional real estate ownership platform takes care of many of these problems. With its help, you can become a partial owner of profitable commercial real estate properties across India at a comparatively small ticket size. What's more, it enables you to choose the location, size, tenants, developer, and even the exact property.

Above all, it saves precious time and money by relieving owners of the need to conduct research and due diligence. Our properties are listed only after careful vetting by our in-house experts. Once you have selected the property, our transaction experts will guide you through the purchase process and help you finish the paperwork. And you can do all this online without stepping out of the comfort of your home!

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Commercial Realty: An Attractive Way To Build Wealth For NRIs

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Commercial property has become one of the hottest investment assets for NRIs in the recent past. A rapidly developing economy, growing urbanization, the depreciation of the rupee, the establishment of RERA, which increases transparency in the realty sector, attractive rental yields, and good value appreciation potential are some of the factors that are driving this trend.

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Commercial Real Estate: Maximizing Rental Yield | hBits Blog

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Commercial Real Estate: Maximizing Rental Yield | hBits Blog

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Rent from real estate is a tried & tested way to generate income for investors. Read more on how to hedge against income uncertainties and earn maximum yield.

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Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth. - Theodore Roosevelt

Rent from real estate is a tried and tested way to generate passive income for investors. It helps add to wealth while simultaneously creating a safety net to hedge against income uncertainties. Along with stocks, bonds and gold, real estate is a popular asset class known to generate stable, long-term returns. It also functions as a source of dual income (through monthly rent and capital appreciation) and is relatively immune to inflationary pressures making it one of the major means of wealth creation for societies over the ages.

In India, real estate has traditionally been a prime investment vehicle owing to a strong preference for tangible assets. Up until now, most of this investment has been channelled into residential real estate. But the boom in the commercial realty sector which is currently underway, coupled with a slowdown in the housing market, present real estate investors with a unique opportunity to explore the former avenue.
Why opt for commercial real estate?
The driving motive of any investment is maximization of returns. Currently, the commercial realty sector is providing much higher returns than the housing sector which has been struggling for the past six years. When it comes to real estate, a key figure to consider is 'rental yields' which expresses the annual income from your asset as a percentage of its total value to indicate your ROI. In the current scenario, rental yield from commercial properties is anywhere in the 8-10% range while the same for housing sector is 3-4%. This proves it is much more profitable to invest in commercial property compared to residential real estate in the present economic climate.
How to maximize your rental yields
Once you are committed to investing in commercial real estate, the next step is to look out for a suitable property. Scouting for property is arguably the most crucial step in the entire process since the fate of your investment hinges on this singular factor. A good property in a great location is the best bet to help you maximize your ROI. Below we look at seven key factors to help you select a good property with the best rental yield.

1. Location

Location is the single-most important factor that determines your ROI including factors like rental yield and asset appreciation. You should ideally choose a place that has high visibility, good infrastructure including roads and public transport, is located close a commercial hub, can ensure steady footfalls, and so on. The objective is to find a place that is commercially viable. Seek out a locality where vacancy rates are below 5% as high turnovers often lead to a moderation in rental income.

2. Property size

Large properties tend to be safe investments, attract better quality tenants, and lead to higher rental yields. This is especially true of premium Grade A properties which provide investors with an excellent option to diversify their portfolio. The main drawback relates to their high cost of purchase. But the fragmented ownership model has been able to solve this problem by enabling the purchase of a small piece of a much larger property at relatively low ticket-size.

3. Quality of the building

Good quality buildings have an edge over their competitors as it is easier to find tenants. They also command higher rents and attract quality occupants. Real estate services company CBRE defines Grade A properties as those whose development includes "an open plan office with large size floor plates, adequate ceiling height, 24×7 power back-up, supply of telephone lines, infrastructure for access to internet, central air-conditioning, spacious and well-decorated lobbies, circulation areas, good lift services, sufficient parking facilities" and "centralized building management and security systems." These properties generate more rental income, display greater capital appreciation, and are easier to liquidate in the market.

4. Regulatory requirements

Be certain to check whether all the paperwork is in place. Commercial buildings in India must comply with a large number of rules and regulations including zoning rules, fire and safety requirements, and so on. Remember also to ensure that all the legal formalities are properly completed. You don't want to be stuck with a bad investment because you did not do your due diligence.

5. Quality of tenants

Be selective about your tenants. If you are investing in a pre-leased property, opt for a unit that has been taken up by a tenant with positive cash flow or strong balance sheet and a reputation for paying their dues on time. Remember to take a good look at the lease agreement to understand factors like lease duration, termination process, frequency of rent escalation, lock-in period etc. These are things that will directly impact your rental yield.

6. Growth prospects

Are rents in the area likely to rise or are they already at saturation level? What are the new offices, commercial hubs and infrastructure projects coming up nearby that will value-add to the location your property is situated? These are some of the questions to consider while finalizing your choice of commercial real estate.

7. Understanding the property market

Finally, try and get a grasp of the property market both at the macro and micro levels. Many different things influence the realty market in a city including economic growth, business sentiment, pace of commercial activity, government policies, access to skilled labour, condition of infrastructure, building byelaws etc. Choose your property after considering all these different factors to determine the best option.
Lowering the entry barrier
Despite the lure of investing in commercial real estate, most people have been unable to participate in the sector due to an extremely high barrier of entry. But the good news is that recent innovations in the field of finance and technology have put purchasing commercial property within easy grasp of common investors. Two of the major developments in this regard are the launch of Real Estate Investment Trusts (REITs) and fragmented ownership platforms both of which allow you to benefit from the commercial property boom albeit through different models. The net result is that many more people can enjoy the fruits of growth of this rapidly expanding sector.

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Commercial Real Estate: Maximizing Rental Yields

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Every person who invests in well-selected real estate in a growing section of a prosperous community adopts the surest and safest method of becoming independent, for real estate is the basis of wealth. - Theodore Roosevelt Rent from real estate is a tried and tested way to generate passive income for investors.

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Property Buying: as Easy as Shopping Online | hBits Blog

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Property Buying: as Easy as Shopping Online | hBits Blog

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Read how online property purchase has emerged as the key to sustained ownership of commercial real estate in the midst of the covid-19 lockdown.

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"Stay home, stay safe" shouldn't mean that all real estate investing must necessarily come to a standstill. At a time when staying indoors has become the mantra to protect the population from the threat of Covid-19, online property purchase has emerged as the key to sustained ownership of commercial real estate in the midst of the lockdown. The need for venturing outside is completely eliminated with technology enabled online dealing as everything you need to make the right decision is literally at your fingertips.

Online Asset Trading

From stocks and bonds to gold and real estate, all asset types can be traded online nowadays. Equities have been bought and sold online for many years, while investors can also trade in government securities through dedicated online apps like NSE goBID. And gone are the days when buyers had to visit a jeweller or a bank to purchase the yellow metal; technology has now made it possible to invest in 'digital gold' of guaranteed purity through common digital platforms such as Paytm and PhonePe.

Although the physical nature of real estate to online purchase is just a matter of awareness, 100% online purchase are now possible in the commercial real estate space with the aid of specialised and secure platforms. Companies operating these platforms perform all the research and due diligence for you so that you can invest safely from comfort of your home.

Online Property Purchase

Property purchase has traditionally required significant physical effort. Activities such as scouting for a location, checking out construction quality, assessing design and layout, inspecting the surrounding areas, and verifying documentation, demand considerable time and energy from the buyer. Issues like maintenance and rent collection require the owner to stay in close proximity of the building even after the purchase. But online trading in real estate is gradually reshaping the industry by removing the need for physical proximity and empowering you to take important decisions based on information on your screen.

Residential Real Estate

Even till a few years ago, purchasing residential real estate meant devoting several days to physically inspecting sundry locations. The advent of the first major online property sites in the mid-2000s made property selection simpler through online listing of inventory. Each listing was accompanied by important details such as pricing, amenities, pictures, and floor plans to make the process as simple as possible for the home buyer. In a recent article by CNBC TV18 " This real estate company sold 500 homes amid coronavirus crisis;" the author has discussed the usefulness of online property buying and how such a medium can be used to reach potential purchasers even in less than ideal scenarios

Many other features have been added to property portals since then including online mapping, virtual 3D tours, video tours, price heat maps etc. Although end-to-end online transaction is yet to become viable in the residential property sector, online portals have had a game-changing impact on the industry by influencing the way customers search for property.

Commercial Real Estate

Unlike residential realty, the more formalised nature of the commercial real estate sector in India is well suited to end-to-end online purchase of inventory through the fractional ownership model. This innovative model is chiefly designed to help in the broad-basing of commercial real estate ownership which comes with massive price tags that put them out of the reach of common people. By allowing investors to own a piece of premium Grade A commercial property at relatively small ticket size, fragmented ownership platforms have opened up the commercial real estate space to ordinary investors by providing high-quality options at affordable prices.

Fractional ownership platforms not only list various properties on their website but also perform due diligence vis-à-vis each listing. They specialise in vetting properties and conducting due diligence with the help of their own staff. They even manage the property for you and help find lessees when a vacancy arises. The entire process is completely online enabling investors to buy property anywhere in the country without the need to venture out. Here's how it works:

Property Selection: The portals display a wide array of options complete with details regarding size, pricing, rental yields, appreciation value, etc. The asset value is completely transparent with a detailed break-up of the pricing structure. You can also find information about the location, tenant (in the case of pre-leased properties), images, video walkthrough, LEED certifications, amenities, name of developer and so on. Practically every detail that is relevant to the selection process from the point of view of the investor can be found on your computer screen.

Due Diligence & Purchase: There's no need to worry about due diligence as all the properties which are listed are carefully vetted by the company. From bank loan documents to land use permissions, everything is carefully scrutinised by professionals. Once you express your intent, the firm will appoint transaction specialists to guide you through the process and answer all your queries.

Maintenance & Earning: The services do not stop with purchase. The company employs staff for the upkeep and maintenance of each property leaving you relaxed and stress-free. They also perform rent collection and assist in finding a tenant every time a property falls vacant.

Selling: Investors can resell the property at any time by simply indicating the same to the company. The company's transaction specialists will help you re-list the property on the portal and guide you through the redemption process.

The transaction process is totally safe with trained specialists handling every aspect of the deal. Due diligence is given utmost importance. Investors too can cross-check key documents using the relevant online forums. Most key documents such as occupancy certificates and building plan approvals are readily available on the websites of the respective municipal authorities.

Tenant profile is an excellent yardstick to validate the quality of a shortlisted property. Reputable Indian and multinational companies with large balance sheets and global footprints follow well-established norms and procedures for due diligence when it comes to leasing commercial property. Their presence can be reassuring of the intrinsic value of your investment and is one of the best parameters to guide you vis-à-vis your investment.

Reliability is the Key

Online property investment is not only simple and hassle-free but also highly secure. Although each offering is pre-vetted by the company prior to listing, investors can also carry out independent online checks to satisfy themselves about the value of their investment. At the same time, the onus is in the customer to select a reliable platform. Reliable real estate purchasing service providers can help you get the best deals in a totally secure and transparent environment from the safety and protection of your home.

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Digital Property Buying: as Easy and Secure as Shopping Online.

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"Stay home, stay safe" shouldn't mean that all real estate investing must necessarily come to a standstill. At a time when staying indoors has become the mantra to protect the population from the threat of Covid-19, online property purchase has emerged as the key to sustained ownership of commercial real estate in the midst of the lockdown.

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Covid-19: The Right Time To Buy Commercial Property  | hBits Blog

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Covid-19: The Right Time To Buy Commercial Property  | hBits Blog

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Read analysis of commercial real estate investing in the current market scenario and why covid-19 presents an unique opportunity for buying commercial property.

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Pandemics cause serious disruptions in the economy, but offer unique opportunities for prudent investors. Some core sector stocks might be wise investments right now. Similarly, buying commercial property for investment could be an attractive opportunity in current times with the potential of stable returns and the capacity to provide dual income through rent and capital appreciation.

With the Covid-19 crisis bringing all economic activity to a standstill, the world economy is suffering badly. Governments worldwide have announced bailout packages targeted at specific sectors to keep their economies afloat.

India recently announced a Rs 1,70,000-crore relief package to protect the weaker sections of society during the lockdown, and stimulus packages for other sections may also be in the offing. Furthermore, the RBI has taken several measures including a 25-basis point interest rate cut and special Targeted Long Term Repo Operations (TLTRO) to deal with the economic effects of the pandemic.

Recessions and slowdowns drive investors away from the stock markets toward safer investments like government securities and fixed income assets that come with low rate of return. They also drive investors towards hard assets like gold which generate no regular income and real estate. Commercial property investment is a smarter option in current scenario because it offers an inflation hedge while also generating fixed income. Unlike stocks it is a tangible asset with real physical value.

In the past, commercial real estate was way out of the reach of ordinary investors due to exorbitant prices. But the advent of innovative investment models such as REITs and fragmented ownership structures have brought it well within reach of ordinary investors. For the past three years, the commercial real estate segment in India has been growing at a rapid pace despite the housing slowdown. The current spate of lockdowns may have temporarily interrupted the growth of the sector which is likely to resume once the economy restarts.

Lockdown Market: Is This A Good Time To Invest in Commercial Property?

Despite the gloom surrounding the economy, investors should consider investing in commercial real estate in a 'lockdown market' right now in light of lowering interest rates and stimulus packages extended by the government and RBI which will have a significant effect on commercial property prices going forward. Below are some reasons why it may be prudent to invest in commercial property at this moment as opposed to investing when the economy starts opening up.

Temporary Dislocation in the market

The current Covid-19 pandemic can lead to temporary dislocation in the commercial property market. Although commercial properties are fundamentally very strong with MNC tenants, rental backed transparent valuations & premium construction quality catering to institutional needs, many developers and property owners are looking to liquidate their properties due to unforeseen cash requirement during these turbulent times. Due to the liquidity crunch in the market, developers are turning to sell their cash generating commercial properties at attractive valuations. Same is the case with commercial property owners who might find themselves in urgent need of liquidity and thus are looking to sell their commercial properties. Thus, many commercial properties are available in the market with strong fundamentals and attractive valuations.

Bailouts promised by the government are expected to promote deficit financing which will have an inflationary effect on the economy. The lowering of interest rates by the RBI, too, will contribute to inflation in its own way. As a result, the cost of commercial property is likely to escalate in the future. Purchasing commercial property at this time will allow you to buy when the prices are still favourable and avoid price escalations.

Interest rate vs Capitalisation rates dynamics

Falling interest rates is expected to have a direct impact on commercial property cap rates(which is similar to the inverse of what PE is for stocks). When interest rates decrease, cap rates can decrease and decreasing cap rates increase a property's value as cap rates and commercial property prices are inversely related. With RBI eyeing more rate cuts, cap rates are also expected to decrease resulting in a price boom for commercial properties. Prudent investors may consider buying now to take advantage of the expected fall in cap rates.

Rising inflation will drive up the prices of new commercial real estate projects in an environment where businesses are still struggling to pick themselves up in the aftermath of the pandemic-induced slowdown. In such a situation, older properties will be more attractive for lessors and purchasers compared to newer, more expensive projects in a still-reviving economic environment. Also delays in new projects due to liquidity issue in the real estate sector and prevailing market conditions will lead to lesser supply.

Portfolio diversification

A good investment strategy involves portfolio diversification to hedge against market volatility. Most of the traditional investment options like Stocks, Mutual Funds, PMS are highly correlated to the stock market and make the portfolio volatile during these uncertain times. Addition of commercial real estate investing can provide a stability in your portfolio as these assets have very low correlation with general market. The rents are generated by marquee tenants having strong business fundamentals, secured by rental agreements and being a premium asset in established micro-markets, the prices are also less susceptible to volatility. Also due to regular rental inflow, these properties can enhance liquidity of your portfolio thus preparing you better for these uncertain times.

If you have the intention of investing in commercial real estate, the 'lockdown market' might be a better occasion than sometime in the future. Smart and prudent investors are always quick to spot an opportunity while other sit back and keep waiting for better times to come. Based on our analysis, there are many deals available in the commercial property space at good valuation and attractive rental yield which can provide stability to your portfolio. Given this excellent opportunity, one should consider including commercial property in their portfolio and reap the long-term benefits.

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Covid-19: Why This Is The Right Time To Invest In Commercial Real Estate

# data[].attributes.attachment_link.description
Pandemics cause serious disruptions in the economy, but offer unique opportunities for prudent investors. Some core sector stocks might be wise investments right now. Similarly, buying commercial property for investment could be an attractive opportunity in current times with the potential of stable returns and the capacity to provide dual income through rent and capital appreciation.