Pre - Leased Commercial Property - Can give you a good return.....

The concept of rental yield is fast catching the imagination of investors in India, especially those in the metros. Investors invest in a property with a view to renting it out, so as to earn a fixed income. For retail investors, it is largely confined to residential properties, given their low investment capacity.

It runs with the weather as high interest rates and exorbitant prices deter them from investing as they result in less annual yield.

But UHNIs ( ultra high net worth individuals) are transacting in commercial properties which are still in demand and offer high annual rental yield. There is a healthy demand from corporate from the IT and BFSI segments, which en masse account for 60-70% of the total demand. While residential properties give 3-6% as rental yield, commercial properties offer a high rental yield in the range of 9% to 15%.

Pre-Leased Commercial Properties command high yields

There is no doubt that real estate holds the greatest attraction for UHNIs. Most investments happen in properties, say a pocket of land, commercial properties like readily available offices or industrial warehouses. UHNIs, say with a net worth ranging from Rs 25 crore to Rs 100 crore and even above, have been mandating wealth management firms or real estate advisors to pick grade 'A' pre-leased commercial properties.

These pre-leased commercial properties provide fixed income. Here, the aim is to lease out to quality tenants, earn lease income over a 3-5 year period and subsequently exit with a moderate to high capital appreciation.

There are mainly two kinds of commercial properties. The first is the lease-hold, mainly offered by government institutions like MIDC; they are leased to the buyer generally for a period of 99 years, extendable further. You actually buy rights to use the property and not the property per se. In a way, you are buying a property without really owning it. You have limited rights on what to do with the property.

The second is free-hold property - you become the exclusive owner of the property as well as the land on which it is constructed. It gives more right and responsibility to the owner. In India, a majority of the pre-leased commercial transactions happen on free-hold basis.

What decides the rental yield in these properties?

No doubt, the entry price is one of the biggest factors in determining the yield. Lower the price, higher the yield. Another key factor is the quality of tenants. If the tenant is a bank or an insurance firm, mainly PSUs, the property commands a rental yield of 6% to 8%. These tenants stay for a longer period and the property is less prone to hopping; hence, it commands a lower yield.

Commercial properties occupied by multinational companies ( MNCs) like foreign banks, investment banks, etc, or domestic firms like BPOs, IT/ITeS units as tenants generate high rental yields, say in the range of 8% to 12%. So, the question arises how a buyer can ascertain if the tenant will stay for a longer period. If the tenant is incurring a substantial expenditure, say to the tune of Rs 2,000 to Rs 4,000 per sq ft on interiors, it can be fairly assumed that they are going to stay for a longer period.

How to calculate the rental yield

The calculation is simple. You are arriving at a price after including the basic price, stamp duty, car parking charges minus security deposit. The annual lease rent is divided by the final price to arrive at a yield. Generally, the lease term happens for a period of three years, which on renewal commands an escalation of 15% in rent. Hence, the rental yield increases progressively every three years.

For eg, a project ABC having a tenant XYZ has a leasable area of 10,000 sqft and is quoting at a rate of Rs 5,000 per sqft. The total cost after factoring in the car parking charges (4 parkings @ Rs 5 lakh each) plus stamp duty (approximately 5%) is Rs 5.46 crore. The security deposit-adjusted outgo is Rs 4.92 crore.

The lease rental is Rs 110 per sqft which entails an outflow of property tax of Rs 30 per sqft. Hence, the net rent comes to be Rs 48 lakh per annum and, hence, a rental yield of 9.76%. If the rent escalates at 15% every three years, the yield increases to 11.78% in 4th to 6th year and 14.09% in the 7th to 9th year, considering other prices to remain constant. The above calculated yield does not incorporate the capital price appreciation, which can happen at any rate.

Ways to take exposure

If you have pockets full and belong to the high net worth individuals' category, you can buy a pre-leased commercial property; so, typically, the transaction will range from say, Rs 5 crore to Rs 100 crore or even higher. However, for investors falling in the smaller bracket, say Rs 1 crore, it is best to enter through private equity-run real estate rental funds which open from time to time. They promise to deliver a pre-tax return (including capital appreciation) of 20% to 25% during the course of the fund's tenure.

The ideas look promising but one must check all the factors related to them, including the quality of tenants and their likely period of stay. One should also check the vicinity and all paths approaching the property. Lower the distance from major locations like highways, railway stations, bus stands etc, better rent it commands.

www.jaipurpropertyclub.com

Real Estate blogs

Contemporary Furniture - Latest Trends and Designs

Want to Redecorate your room, How about Contemporary Furniture?????

Contemporary furniture is the furniture that gives your room or interior the most fashionably up-to-date look. If you want to decorate your rooms in a contemporary style, you should have a thorough knowledge about the latest trends in interior designs. Moreover, if you have interest in the changing styles in the world of interior design, you will definitely be able to rearrange your rooms in a contemporary fashion without the help of a third person. You may well surprise yourself with your hidden talent. If, however, you would rather leave the details to someone else, it is better to hire an architect or a trained interior designer. 

The opinion of people with regard to what constitutes contemporary style may differ from one to the other, depending on the taste of the persons concerned. Still all of them may agree with one thing - bold colors are something that is practically standard in contemporary furniture style. Most interior designers now prefer to use furniture that use bold colors such as red, white, black, pink, blue, green, etc. when they plan the interiors of a room. It has something to do with the times, perhaps, as the use of bold colors symbolizes the owner's self confidence. Furniture with smooth, clean and geometric shapes are the most popular with architects looking to give a trendy and contemporary look to the interiors of a home. 

To know what amounts to this contemporary style in furniture, one has to know what amounts to a traditional style in furniture first. It is quite easy to understand the difference between these two styles in furniture. The most easily identifiable part is the color scheme used by the designers. While the contemporary style of furniture uses bold contrasting colors, traditional style uses only the colors that compliment well with each other. There is also a vast difference in terms of traditional furniture being more bulky and intricate. Modern furniture is made sleek and light with simple straight lines. 

Contemporary style in home decor uses a combination of metal, glass, and wood in a very stylish and sophisticated way. A room furnished in tune with the contemporary style of furnishing will look more spacious and airy than one designed using the traditional style. An over furnished room can never be called as a room designed in accordance with the new trends in home decor, as larger open spaces are 'in'. The sleek furniture you use should lend a sophisticated look to the room. 

The furniture that you use should be capable of making the room warm and welcoming for the inhabitants as well as the guests. So go ahead and make a strong fashion statement with the latest contemporary furniture to adorn your home! 

www.jaipurpropertyclub.com

home-garden blogs

Studio Apartment - Make it Maximize

Studio apartments have a lot to offer, even though the available space can be skimpy. They're cozy. Don't underestimate the ability of a small space to create intimacy. The trick is to add the other necessary elements, like furniture, color and storage, carefully. It's easy to make a small space look too crowded if you aren't paying attention to detail. You might have way too many things for the space, but then again, they might just be organized incorrectly for the flow of traffic.


1. When you don't have the luxury of lots of space, the first thing you have to do is strategize how you'll make everything work well together. One foolproof way to start is by using a monochromatic palette. It will make the space look larger and will work with, rather than against, the other elements in your design. Choose the same or similar shades for the walls, carpets and drapes. This doesn't have to be a compromise move, even if you love vivid color. Just indulge yourself in your choice of accessories, wall art and textiles.

If this sounds bland, there are hidden benefits you may not have considered. If your studio apartment has odd angles or other irregularities that you want to camouflage, they'll tend to blend into the background when you keep it neutral. A neutral palette will also make it easier to perform seasonal wizardry, like switching out a cherry red area rug for a pastel green option in spring.

2. Scale is important in rooms that are either too small or too large. Instead of a standard sofa, use a loveseat or two. Take advantage of the ability of glass to blend with its surroundings by using it liberally in your choice of shelving and tables. When you shop for furniture, opt for pieces with onboard storage, like headboard/bookshelf combos, storage ottomans and side tables with built-in drawers. Evaluate the footprint of all the pieces you buy. Once the furniture is in place, you'll still need space to walk around it. Shallow dressers, drop-leaf tables and modular computer desks are easier to incorporate into a small space than their conventional counterparts. Be choosy about what you buy, and look for scaled-down options.

3. Your studio apartment design should conform to the flow of traffic in, out, around and through the space. Determine how you and your guests will use the space, and then establish dynamic living areas based on that. The location of the entrance, bath, kitchen, windows and other stationary fixtures will get you started. Defining specific areas with dividers, specialty lighting or carpeting will help anchor the space and create natural breaks and focal points.

4. Studio apartments usually have meager storage, so make the most of modular storage options and clever solutions like space bags and open shelving. Wall-mounted and freestanding shelves can do triple duty as dividers, wall storage and decoration. If they're partly made of glass or glass block, they can also help open up the space and maximize the available light.

Small spaces can make a big impact when you incorporate scale, neutrals and a practical layout into your design. It's a winning combination that's always in style.

www.jaipurpropertyclub.com




Real Estate blogs