The Rise of HNIs in Commercial Property Investment
March 20, 2010
Challenging the Status Quo
Think again if you believe commercial properties are exclusively purchased by companies to expand their business footprint. High Net worth Individuals (HNIs) are increasingly investing in commercial properties, marking a significant shift in the Indian real estate landscape.
A Growing Trend
In the past, New Age Indians primarily invested in residential properties. However, this is no longer the case. According to Samir Jasuja, CMD of PropEquity, a substantial number of HNIs are poised to invest in commercial properties, contingent upon banks' willingness to offer loans to individuals for this purpose. Jasuja noted, “Banks' reluctance to sanction loans to individuals for commercial property investments is a global phenomenon, not unique to our banks.”
The Banking Conundrum
Banks are hesitant to offer loans for commercial property investments due to the high default rates associated with this segment, in contrast to residential properties. Consequently, banks prefer to offer loans for residential properties, while being more cautious when it comes to commercial property investments.
Expert Insights
Anu Gupta, Director of Century 21 India, advises HNIs to consider investing in commercial properties, highlighting the potential for substantial returns. Gupta explained:
- Loan Benefits: HNIs can secure bank loans up to 75-80% of the purchase price.
- Rental Income: Loan repayments can be offset against rental income generated by the commercial property.
- Long-term Appreciation: With the growth of the retail and commercial industries, investors can anticipate significant appreciation in property value over time, all while gaining a high-value asset with maximum returns (thanks to tax benefits against rentals).