Guide for Chennai Commercial Real Estate Investment

Chennai holds a significant part of India’s automotive industry and is, thus, named the “Detroit of Asia.” It   increases Chennai’s need for commercial buildings by creating many new job possibilities. 

Moreover, Chennai is rapidly accommodating the influx of IT and financial services companies  setting up here simultaneously. When it comes to office space leasing, the city recorded a 124% Year-on-Year (YoY)  rise in the first quarter of 2022. Furthermore, the city expects to have over 14.22 Million Square Feet (MSF) of additional office space inventory in the next three years.

Thus, it has become one of India’s top commercial real estate investment locations. 

Reasons for Chennai Commercial Real Estate Investments

The main reasons why you should consider investing in commercial real estate in Chennai are as follows:

Steady Cash Flow

Commercial real estate properties can earn income more efficiently than  shares, bonds and gold investments that witness frequent market fluctuation. Moreover, Chennai is a capital city  going through a wave of development in the upcoming years. This sense of stability can keep you stress-free even during volatile market conditions. 

Better Connectivity

Chennai is one of the best localities for  commercial real estate due to its good connectivity,  making  the city centre a desirable investment option. This connectivity will also improve shortly,  resulting in further city development. 

Affordability

Chennai has one of the best real estate offerings with properties at affordable prices. There’s also a differentiation in the value of a property   based  on  its location. For example, if a commercial property is in the central  city , its value would be higher than that of   property  in the outskirts. 

Chennai Commercial Real Estate Investment Opportunities

There are many locations in Chennai which support commercial real estate projects. Investing your money in these locations can help you earn a substantial profit in the long run. 

Some of these crucial  locations are as follows:

1. Korattur

The Korattur area of Chennai is home to the Tamil Nadu Housing Board (TNHB) Colony and many other private establishments. Because of this, it is in a highly desirable area for many working people searching for typical housing. . Hence, this place is ideal for commercial real estate investment as rental properties  can generate a lot of profit. 

2. Perambur

Perambur is an exceptionally well-connected city located 8 kms from Chennai Egmore station and Central Railway Station. It offers plenty of affordable commercial space choices and is a bustling city. All these factors make this place ideal for commercial real estate investment.

3. Choolaimedu

This location in Chennai is experiencing massive employment opportunities and infrastructural development to meet  users needs. Moreover, many restaurants, malls and food hubs in this area are attracting daily office-goers making Choolaimedu ideal for commercial real estate investment. 

Things to Keep in Mind While Purchasing a Commercial Property in Chennai

The important things to keep in mind while purchasing commercial real estate in Chennai are as follows:

Proper Research and Market Knowledge

Purchasing a commercial space in Chennai involves enormous risk and requires substantial   market research and knowledge. Therefore,it is important to know about the developer, their  experience, reputation and market position. 

Know Your Needs and Budget

Planning your expenses and budgeting before buying a commercial property is essential. It  will  ensure your property investment and prevent financial distress after purchase.  Additionally, make a list of the property specifications before the purchase so that you stay within budget. 

Lease Structure

A lease is a legal contract that depicts the relationship between the current owner of the property and its upcoming occupier. For example, if you buy a commercial space in Chennai, and lease it out to businesses looking to set up their workspace in a city’s prime location.  However, confirm that the tenant is upfront about paperwork and advance payments.

Check Authenticity through RERA

The main aim of the Real Estate Regulatory Authority (RERA) is to promote transparency in the real estate sector by regulating transactions between promoters and buyers of commercial and residential projects. It is a statutory body notified by the Government in the Real Estate (Regulation and Development) Act of 2016. 

Here, you can check the authenticity of the property and its builder by visiting the website of RERA Tamil Nadu. Hence, it prevents your investment from getting involved in fraudulent activities and  secures your finances. 

Stamp Duty Rates in Chennai

It is essential to keep stamp duty rates or registration charges in mind, as these will be a part of the real estate investment amount. 

Let us see the stamp duty rates for the sale of commercial real estate in Chennai:

Registration Charges in Chennai

Other than stamp duty, it is also mandatory to transfer the ownership of the property in your favour by paying a registration fee to the Government. The property registration charges in Chennai are in the following table:

The registration charges and stamp duty rates of commercial properties in Chennai depend on the document category. Thus, if you buy a commercial property, you would be required to pay charges according to the document category of that particular property.

Commercial Real Estate Sector Forecast of Chennai

Chennai recorded a gross leasing activity of 1.9 MSF in the 3^rd quarter of 2022, resulting in a YoY rise of 4%. It also registered a 60% growth in new launches over the last two quarters.

However, unlike the first and second quarters, leasing activity in the 3^rd quarter was mainly  from fresh leases from the IT sector. It occupied 49% of the key takers in this quarter, followed by 14% flex space and 12% engineering and manufacturing.

Read more: Guide for Kolkata Commercial Real Estate Investment

Commercial Real Estate vs. Other Asset Classes

The difference between the returns generated from commercial real estate and other asset classes are as follows:

• Commercial Real Estate vs Residential Real estate

When comparing residential real estate to commercial real estate, the former suffers three main problems. First, residential properties need more demand,   especially in the premium category.You need to lease this annually. However, you can rent office spaces for longer tenures. 

Moreover, the vacancy risks are higher in residential properties than in commercial estates that witness a frequent turnover of tenants.

• Commercial Real Estate vs Stocks and Equity Mutual Funds

Commercial real estate offers assured returns with direct asset ownership if we compare them with the stock market on an aggregate level. On the other hand, the stock market witnesses significant  fluctuation with higher risks but provides comparatively higher returns. Thus, if you are a risk-averse individual with a long- term investment horizon, you can consider investing in commercial real estate. 

• Commercial Real Estate vs Gold

Real estate is a  stable investment option that is considered to be less risky, offers additional tax benefits and generates passive income. On the contrary, gold is a commodity with  higher volatility and risks of being stolen. However, you can also have exposure to gold even via digital gold, gold mutual funds and gold ETFs

• Commercial Real Estate vs Bonds

Bonds (AAA-rated) have low credit risk when compared to commercial real estate. Moreover, commercial real estate investment can be less liquid than bonds due to higher transaction costs and, thus, takes a longer to sell. 

Commercial real estate properties can produce a stable  passive income like Bonds. However, the credit risk associated with renters who must make on-time lease payments affects commercial real estate investments. 

Here is a table to represent the comparison of assets on the basis of returns, volatility, liquidity, risk, and ticket size.

If you are planning to purchase bonds, you can explore our website. Here, you can choose from some of the high-rated bonds  currently available.  So, register now and start investing in debt securities to enjoy stable returns!

Steps to Invest in Commercial Real Estate in Chennai

The steps to follow for investing in commercial real estate in Chennai are as follows:

Step 1: Analyse your budget and finalise the amount you want to invest.

Step 2: Perform intensive market research on potential sites and their specifications and check which has  a high chance of developing and flourishing in future.

Step 3: After carrying out the market research, make a list of the properties which match your budget.

Step 4: Fix a date,  go on a field tour to these sites, and analyse them minutely. Here, you can also consult a real estate agent to clarify the prospects and profitability of a particular location.

Step 5: Finalise a commercial property that meets your requirements and budget.

Step 6: After finalising the commercial space, prepare the legal documents required to purchase it, such as a property assessment extract, a title deed, a foundation certificate, and many more.

Step 7: Complete the registration by submitting the documents and stamp duty formalities to transfer the property ownership in your name.

Step 8: Pay the service fees to real estate consultants or brokers if you have availed any help or services from them.

Step 9: Lastly, purchase an insurance plan to cover your newly purchased property. It  will provide financial assistance to you and your family if damage occurs to the property.

Also Read: Guide for Hyderabad Commercial Real Estate Investment

Final Thoughts 

Chennai is experiencing high employment demand in the automotive and IT sectors, which has been increasing the demand for real estate here. Moreover, its rapid connectivity and infrastructure development  attract individuals towards this place. Thus,  this place is becoming a top commercial real estate investment destination.

Frequently Asked Questions (FAQs)