We recently came across some
assignments in industrial area and that gave the way to this post. We thought
of accessing this area as an option of investment and after analyzing, we came
up with many interesting conclusions.
What is Industrial Real Estate?
All the land and properties
located in the manufacturing zone of a city/town can be categorized under the
category of Industrial Real Estate. This includes:
- Industrial Land
- Industrial Sheds
- Industrial Storage Spaces
- Industrial Laboratories
- Industrial Offices, etc.
In simple words, each and every
realty asset class, related to the production/manufacturing of goods &
located in the Government-specified industrial areas comes under the periphery
of Industrial Real Estate.
What if you don’t have any industry/production unit?
This is the main issue that every
investor faces while investing in industrial area. Even we were facing the same
issue from a long time and now we are hunting desperately for an industrial
asset. Let’s see what made us change our mind.
1
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Unprecedented
Rental Returns
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As has been our philosophy, we pay equal heed to rental returns as appreciation returns; we were astonished by the potential
of industrial properties in this aspect.
An industrial land is capable of paying a rental
return to the tune of 200% more than an equivalent investment in residential
property.
Take for instance, an amount of 5 million INR
invested in residential property in India will yield a rent in the range of
8K-12K INR per month; while an equivalent amount invested in industrial area
will yield anywhere between 20k-25k INR per month.
|
2
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Huge Asset
Creation
|
Industrial property transactions are dealt in square
meters rather than square foots or square yards. The reason being, land is
relatively cheaper in industrial areas and the availability is abundant.
Hence once invested in an industrial area, you will
have a huge asset created at your disposal.
|
3
|
Future Option
|
In case you or your heirs think of moving into the
manufacturing sector, you won’t have to worry as you will have your own land
to start the production unit on.
Of course this reason looks stupid and insane but
trust us, sooner or later most of us faces this issue. We want to start our
production unit, but are inhibited due to the land scarcity issues.
|
4
|
Steady Land
Appreciation
|
Also for our readers who are motivated more by the
value appreciation rather than rental aspects, industrial real estate
provides awesome prospects.
Industrial land appreciates at a slower but steady
rate and at the end of a period of 5-10 years; one can expect handsome
returns on his investment.
|
How can I invest in this arena?
Simple,
- Look for a cheap land on a property portal on your city and grab a decent amount, in the range of 1000-5000 meter squares
- Get 2-3 sheds constructed of about the size 300 meter squares each
- Put up your property for rent and enjoy the spectacular returns for life!
What are the risks in this type of investment? <link>
- You may be unable to find a tenant for your property: No issues, you have an asset and sooner or later you will find one.
- Too much investment upfront: Think of it this way – which other asset class promises you the same passive returns on same investment?
- Land may get acquired by government if unused: More reasons to cheer up in this case as the new land acquisition law provides more than awesome returns upon acquisition.
Closing Thoughts
We have surveyed a lot in this
arena and have come up with the above conclusions. This was the only reason
that we took so much time to write this post. After our research and analysis,
we feel that we made a big mistake by not investing in this sector earlier. But
this is our understanding; you may definitely differ here.
------ Thanks for reading RealT Horizon J ------
