A business flourishes only when its expenditures are less and earnings are high. Imagine buying a commercial property in millions and earning thousands from it. With the onset of the COVID 19 scenario, the businesses are becoming highly volatile, and due to the imposition of social distancing and lockdown, no one can predict the future. So, if you are buying a commercial space and planning to rent it out or use it for your own business, think before trying this.
- Let’s do the mathematics to make it clearer
- Average commercial property price: Rs.2crores
- Average rental: maximum Rs. 70, 000
- Property valuation after 10 years:?
Transformations in the Real Estate Industry
The property market has already achieved its peak in the past few years, and it will become stagnant in terms of valuation. There is a maximum returns rate for every asset, and after a time, it stops giving the profits. Consider the case of petrol. Petrol is a high-value holding commodity, and there have been wars because of petrol fuel. But now, with the introduction of alternative fuels like hydrogen, electricity, and CNG, in the upcoming years, petrol will be the least preferred fuel because it pollutes the environment.
Similarly, in the case of the property market, the valuation of the property stops at a certain point in time. Take an example of the Jewar Airport property area. A few years back, when the announcement of the Jewar Airport wasn’t made, there was no investor for the area. The Used large pieces of land for cattle grazing and farming. Gradually, It made the Yamuna Expressway plan. The government purchased land suitable for eight-lane highways.
Location Matters
But, when the Jewar Airport announcement was made, the poor landowners got the best prices of their land pieces. Families doing labor jobs are now buying duplex flats in Noida, Gurugram. So, it is always advisable to verify the property and its future aspects.
This blog is not about letting you know about the demerits of buying property. This blog is about financial literacy. If you get a commercial space on rent, you are free to move or set up your business anywhere. If you rent commercial property, you can invest the amount you were planning to buy property in some other investment options. Also, you can run a similar business on commercial space on rent.
Benefits
Commercial space on rent has its benefits. First of all, you are obliged to pay only rent. If any property damage happens due to some third-party reasons, the property owner will be responsible for it. If your business prospers, you can take it online leave the rental shop after the rental agreement date. No business runs on profit from day one. In the initial stage, the business runs on loss, then it gradually comes to the breakeven point, and then it begins to fetch profits.
So, imagine investing 2 Crore in a shop and not achieving the breakeven point and paying for personal savings or lending expenses. On a concluding note, buying a property has become an old trend because it comes with other liabilities also.
