The commercial real estate asset class in India has grown to be one of the most preferred investment options for international institutional investors.This asset class has been largely democratized through innovation and technology, giving retail investors unprecedented access.
In recent years, commercial real estate structured debt has emerged as a powerful financial tool. It has empowered investors to optimize their returns and unlock the true potential of their real estate ventures.
Commercial real estate structured debt is the way to go if you’ve been wondering how to start investing in commercial real estate or how to invest in it with little money. If you’re looking to invest in commercial real estate structured debt, invest it via alternative investment platforms like Assetmonk. Via Assetmonk, you can invest with just Rs. 10 lakhs.
Why Consider Alternative Investments in CRE?
Due to the advantages of diversification, the possibility of higher returns, the low interest rates on FDs, market volatility, and long-term growth prospects, investors in India are looking into alternatives to equity markets and FDs. This change is also being driven by global trends in favor of alternatives, innovation in investment platforms, and regulatory support.
Commercial real estate investments have long been a lucrative avenue for investors seeking substantial returns and wealth growth. Here’s why:
Diversification is the key component of alternative investments’ contribution to portfolio resilience. An investor’s portfolio is diversified by alternative CRE investments, which also serve as a buffer against downturns in the traditional real estate market. For example, compared to traditional real estate, alternative commercial real estate (CRE) investments saw comparatively smaller declines during the 2008 global financial crisis; however, precise figures require further verification.
By diversifying across these different asset classes, investors can effectively spread risk, reducing the impact of a significant downturn in any area.
India’s changing workplace culture has increased demand for flexible office spaces. The rise of co-working spaces has revolutionized the commercial real estate landscape in India. Operational flexible office stock has increased to over 53 million sq ft across the top seven cities, a significant 75% increase from pre-pandemic levels of roughly 30.3 million sq ft.
This trend provides opportunities for both small investors and institutional players.
The estimated size of India’s CRE market currently stands at USD 33.62 billion, poised to reach USD 87.57 billion. The growth is anticipated to continue at a remarkable CAGR of 21.1% during 2023 – 2028.
Source: Mordor Intelligence
Similar to how manufacturing investments and rising consumer demand have made warehousing a high-growth real estate asset class. According to projections, India’s supply of warehouse space will increase from 344 million square feet in 2023 to roughly 516 million square feet by 2026.
Alternative CRE investments frequently offer higher yields, especially when entering the market at opportune times. The internal rate of return (IRR) on alternative commercial real estate (CRE) investments usually falls between 12% and 17%, based upon historical data.
For instance, commercial real estate structured debt via Assetmonk offers an assured IRR of 17 percent with minimal investment of just 10 lakhs.
What is important to understand in the terrain before Investing?
Similar to other real estate, location-specific socioeconomic factors impact commercial real estate. Examine the trends in growing urbanization, infrastructure advancements, and regional growth indicators that may have an effect on the asset’s value.
Developer and Building Credibility:
Evaluate the developer’s reputation prior to investing. Blue-chip tenants can be attracted to properties with high-quality amenities and infrastructure, increasing the asset’s appeal and potential for steady rental income.
Assetmonk provides a reliable and investor-friendly tech platform that is accessible to all investors and strives to democratize real estate investments and does a thorough 100-point due diligence process for asset listing, making them a secure platform for commercial real estate investment.
There could be longer lock-in periods for CRE investments. Prior to committing, make sure you comprehend the lock-in period and evaluate your financial status to make sure you are comfortable with the liquidity terms.
Through alternative investment platforms such as Assetmonk, investors can participate with a minimum investment horizon of 36 months and earn an assured IRR of 17%.
CRE isn’t a single entity. It includes a wide range of assets, including specialized retail spaces, warehouses, data centers, and office spaces. Investment decisions can be greatly impacted by having a thorough understanding of the complications and potentials of each type.
Seeking advice from financial advisors or seasoned real estate professionals can be extremely beneficial, particularly for novice investors. They can provide insights, warn of potential pitfalls, and guide investment strategies.
Emerging Opportunities in 2023: The Rise of Real Estate Debt Funds
In the dynamic world of real estate investing, private equity has long been the dominant force. But there has been a noticeable upsurge in the acceptance and performance of private debt funds within the real estate industry in recent years. These funds offer a more reliable income stream and stable returns compared to their equity counterparts. Real estate debt funds are becoming a more appealing choice for investors looking to preserve capital and earn consistent returns, as banks are reducing their lending and institutional investors are beginning to accept them more readily.
When it comes to consistent income, private debt funds are a clear advantage. These funds typically issue short-term debt with fixed interest rates, frequently linked to the Prime Rate or SOFR, providing a consistent and predictable cash flow over the course of the loan. Investors seeking stable returns will find this steady income stream especially alluring.
Thus, Real estate investments provide the potential for regular income through rental yields.
It provides investors with fixed income and regular interest payments throughout the term of the investment.
Reliable Returns and Growing Acceptance:
Investments in private debt funds may not return as much as those in stocks, but over time, they are more dependable and stable, according to D Magazine. Investors are starting to embrace the appeal of these funds and are abandoning high-risk, high-return strategies in favor of steady debt issuance and core real estate activities.
Less than ten years ago, most investors refused to accept a ten percent return from a commitment to credit strategy. A change in investor sentiment has been observed in the industry, though, as there is an increasing desire for a “safe place to earn a 10 percent return.” Consequently, institutional investors are drawn to real estate debt funds, which are growing significantly and offering a stable investment with respectable returns.
Opportunities Amidst Tightening Liquidity:
The banks’ withdrawal from the lending market has given real estate debt funds a lot of opportunities. Banks have reduced their lending due to various factors, including failures and a reserved capital approach. Borrowers are increasingly turning to debt funds as an alternative source of capital as banks tighten credit even more, especially for construction loans.
Commercial debt funds, as well as real estate debt funds, do well in volatile capital markets and seize opportunities when liquidity becomes scarce. Their capacity to intervene and offer funding for building projects—where bank withdrawals have been more dramatic—has increased their market dominance. Banks predict that the need for debt funds will continue for a number of quarters as they build up their reserves and get ready for a more difficult environment.
Real estate investments in India can offer tax benefits such as deductions on home loans, exemptions on rental income, and capital gains tax benefits on long-term investments, subject to applicable rules and regulations.
You can start your journey today with Assetmonk’s Signature series and Apex series with a minimum investment of 10 lakhs and an assured IRR of 17%. Moreover, investors have the potential to enjoy tax savings of up to Rs. 50,000.
Bottom Line
One of the best investment opportunities that allow for significant profit potential is commercial real estate. With its income potential, diversification benefits, long-term appreciation, and attractive tax advantages, commercial real estate investment offers a well-rounded investment avenue.
For investors looking to preserve capital and earn steady income from the real estate market, Commercial real estate structured debt has become a reliable and alluring choice. Compared to private equity, these funds provide investors with a less volatile and more predictable investment strategy due to their seniority in the capital stack and consistent cash flows.
The growing acceptance by institutional investors, coupled with the tightening liquidity in the lending market, has created significant opportunities for real estate debt funds to flourish and continue their growth trajectory. Real estate debt funds are expected to be significant players in the real estate investment scene as the market develops and more investors become aware of its advantages.
As one of India’s best alternative investment platforms, Assetmonk stands out for offering a wide variety of attractive options for astute investors. Our core expertise lies in extending tailored assistance and meticulously curated real estate-backed fixed-income investment products. Assetmonk offers its esteemed clients customized investment options with an assured 17 percent annual percentage rate (IRR) and a minimum investment threshold of 10 lakhs.
| Are you an
Entrepreneur or Startup? Do you have a Success Story to Share? SugerMint would like to share your success story. We cover entrepreneur Stories, Startup News, Women entrepreneur stories, and Startup stories
|
Read more business articles related to Sales, Marketing, Advertising, Finance, Entrepreneurship, Management, Education, and Industry at SugerMint.