Investing In Pre-lease Property? That’s A Smart Move
Understanding the investment in pre-rented property and make an informed decision.
Investment in pre-rented property or pre-leased property in India is on the rise. Post the global pandemic that hit us like a bus, each investor is looking at smart and high-return investments to begin with.
Keep on reading further to understand why pre-leased property in India has gained momentum, and how the estimated growth trajectory of the Indian real estate sector looks like.
Understanding The Concept Of Pre-rented Property!
A thorough property investment guide for real estate investors.
Every definition of what a pre-rented property is boils down to a kernel of buying and selling a property on lease, which belongs to an institution or body. Here’s how a layman would understand the concept.
Preleased or pre-rented properties means, properties sold with tenants, i.e. a property leased to a tenant and thereafter sold in the market. The lease will be transferred to the new owner with the transfer of property. The new owner will enjoy the lease rent subsequently. Let us understand this through an example — Mr. Gupta has a 2000 sq ft Ground Floor shop in Ahmedabad. He has leased the shop to a bank at a rent of Rs 1 lac per month. He sells the shop to Mr. Sharma at Rs 1 cr. Now under the new arrangement, the bank will start paying rent to Mr. Sharma.
Growth Trajectory Of Pre-leased Property Investment In India!
Here’s why pre-rented property investment is a smart move for real estate investors.
Generally, pre-leased properties are commercial properties in India. However, with the sluggish market regime, and a recovering economy, residential properties have come under the radar of this concept. Pre-lease properties are generally rented/leased for a minimum of 3 years.
Pre-leased properties of any type act as moderate-risk factors that earn humongous returns of at least 5% per annum. It comes as no surprise that as the economy is shifting shape, and the rate of investments in real-estate in India has significantly gone down, the populace has considered the option of buying an office space of a house in India.
Talking of global real estate markets, we found a rather interesting view from Statista’s research efforts. Take a look at the expected cost of prime commercial offices from 2019 onwards.
Thus, investment in a pre-lease property comes as a smart move for real estate investors. We came down a list of benefits that come with investing in pre-rented properties.
Benefits Of Investing In Pre-rented Properties
All we suggest you do is, glance through the pointers to get an idea.
- Solid ROI
Buying commercial property as a pre-lease investment gives returns from zero days. As the property is leased, the owner can enjoy up to 20% returns on this investment. - Principle Increase
Real estate investment in India is an appreciating affair. Very rarely does a property investment go in vain. The owner benefits hugely from the purchase and can sell for more than the amount for which he/she bought the property. - Minimal Risk
Buying real estate comes with minimal risk. Whether it is the ROI or the ownership of property, it comes with comparatively lowered risks. Every pre-lease property can give at least a 3% return on the investment. - Compound Rentals
With pre-rented properties, rentals are calculated on compound interest bases. In commercial property- The owner increases the rent mostly in 3 years by 15%. or you can say 5% every year. This is the basic scenario; it can change in different circumstances. - Upturned Asset Accumulation
Since the property is on a lease, an owner can pay-off the loan if any, or buy more assets with the money earned out of the previously invested property.
Summing Up
Let’s quickly look at some of the types of pre-leased properties to invest in
1. Lands & Plots
2. Commercial offices
3. Commercial chambers
4. Apartments
5. Residential buildings
6. Residential houses & Bungalows
7. Industrial lands
8. Industrial sheds
9. Condos
10. Warehouses
11. Godowns.
As we said, an investor must understand and be able to foresee the need before investing in pre-leased properties. In short, the scope of pre-leased properties in India is wide. If you’re looking to invest in pre-rented or pre-leased properties in India, we would be able to talk to you about it. We would love to understand what you’re looking for and consult on property investment to the best of our capacity.
