Investment in Commercial Property for Assured Return

The basic paradigm of investing states that risk and returns are directly proportional and real estate is no different story. A big question in every investor’s mind is whether he/she should invest in commercial property for assured returns or not. Everywhere in the world of real estate, there are lucrative offers that encourage the investor to invest a sum of 25 lacs or above and offer returns of about 10-12%. The offers are made during the construction or the pre-launch period by the builders. So what are the pros and cons? We take a closer look.

Why builders offer assured return

The major advantage that assured return projects offer builders is sales. This is the major factor that drives this marketing scheme. If the commercial spaces are sold while the project is still under construction, then it relieves a lot of pressure from the shoulders of the builder. And through these projects, the builders often establish a leasing company as well, which is a subsidiary to their main real estate company. The leasing company manages the leases to be given to commercial investors. This adds to the overall income of the builder. The builder also minimizes the risk of not renting out the property on time or at the expected returns because now it is actually the investors’ money at stake. Another major advantage for them is that they have to pay only 10-12% interest (return) to the investors, whereas if they would’ve applied for a bank loan then the interest would have been stratospherically high, in the range of 15-20%.

How it helps investors

Many a time, the investor may get the property at a much lower price than they would have expected or afforded. Thinking of acquiring a commercial property in about 25 lacs in Delhi NCR may seem like a joke but assured return projects offer the same oftentimes. If the investment made is hefty, then so will be the returns and in that case it could offer a stable source of monthly income to the investor. Most importantly, the headache of the investor ends there and the buck stops at the Leasing Office to find a lessee for which the investor holds the share.

The bottom-line

Assured return is a good form of anyone who has an appetite for risk and has patience as one of their key characteristics. The investor should have knowledge of the real estate industry in order to avoid builders who charge overtly for a particular project. Patience is necessary because the returns usually start flooding in after the investment has been made completely. The returns may also depend on a few factors upon which the builder and investor have no control over so that might also require a little patience.