Wednesday, 24 December 2014

PROS-CONS - Invest at the Right Stage

Here are the pros and cons of investing at each stage (construction stages) or types of commercial projects.
You can invest in any of the following stages or types of commercial property: when the property is under construction; a property under construction that offers assured return; a property that has been constructed but is still lying vacant; or a ready building for which tenants have already been found. You may also invest in a shared property. When you invest in a property under construction, you are able to buy it at a low cost. However, by investing at this stage, you run what is known as development risk. Development risk is one where the developer could delay the completion of the project, or the developed property may not be of the quality that the builder promised.

Nowadays, you also have the option of investing in a property under construction that offers assured returns. Amidst the slowdown in the real estate market and the adoption of more stringent norms by banks, builders are finding it hard to raise loans.

If at all they manage to raise loans from Non-Banking Financial Companies (NBFCs), they have to pay interest rates as high as 16-18%. Therefore, many developers have started offering assured returns on their projects. This is an innovative means through which they are raising finance for their projects.

The advantage of an assured return scheme is that your investment starts earning a return from day one. But these projects come with several risks too. One is that these projects also carry development risk.

Also examine the quality of the occupiers: is it a small local company, a large Indian company, or an MNC?

Quick Byte: Now a days, you have opportunity of investing in a property under construction that offers assured returns.

Source: PropertyatNeoDevelopers.Wordpress.Com

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