Guide for Salem Commercial Real Estate Investment
Salem is a beautiful Tier II city in the Southern Indian state of Tamil Nadu. It is a lovely city surrounded by hills and, thus, a famous tourist destination.
IT (Information Technology), textiles, steel and agriculture are the economic growth drivers of this city. Salem is known as the ‘steel city of Tamil Nadu’ because of its many steel factories. The steel melting shop at Salem Steel Plant produces 1,80,000 tonnes of steel slabs per annum. Salem is also a central textile hub of Tamil Nadu.
By investing in properties like hotels and resorts, an investor can capitalise on the potential of this city and earn money. Now, let us look at the commercial real estate prospects available in Salem.
Reasons to Invest in Salem Real Estate
Detailed below are the top reasons for making commercial real estate investments in Salem:
Salem is well accessible to the state capital through the Chennai-Salem Expressway and is known as the defence corridor. Announcements of several infrastructural developments took place over the past few years for Salem, such as IT developments and aerospace parks. These make the city a viable place for investments in commercial real estate.
Though the city has a strong IT, textile and agricultural sector, the State Government has proposed schemes to strengthen its warehousing, manufacturing and mining industries. As a result, it will create more employment opportunities, leading to price appreciation for commercial real estate.
The city enjoys a warm climate throughout the year, with the highest and lowest temperatures being 39 degrees Celsius and 16.7 degrees Celsius in summers and winters, respectively. As a result, commercial spaces can operate around the year and are not subject to high seasons and off-seasons.
Besides its pleasant climate, Salem has several tourist attractions that draw in small crowds. Yercaud is a popular summer resort and a picturesque hill station. Hogenakkal waterfalls, called the “Niagara Falls of India”, is another must-visit spot near Salem. Other popular tourist destinations include Carbonatite rock formations, Kailasanathar Temple, Kodiveri Falls, etc.
Commercial Real Estate Investment Opportunities in Salem
You can consider investing in commercial properties in the following areas in Salem:
It is a beautiful hill station in Salem where you can consider investing in tourist accommodation or multi-family dwellings. You can also invest in commercial spaces that would cater to primarily young adults, as there are several schools in Yercaud. The price for land starts from ₹1,129 per square foot.
You can also consider investing in industrial lands like coconut farms in Deevattipatti. It is located on the border of Salem district and Dharmapuri district and has several educational institutions nearby. The price of commercial property starts from ₹115 per square foot.
Things to Consider before Purchasing a Commercial Property in Salem
Listed below are the essential factors that you must consider before making commercial real estate investments:
Consider consulting a real estate expert or an advocate to understand the risks and profitability of a property before entering into a contract with a property owner. A lease is a legal document that clearly defines the relationship between a tenant and a property owner.
Check Authenticity through RERA
Every builder and developer in India must register their property details on the RERA portals of their respective state. So when you make commercial real estate investments in Salem, remember to check the property’s authenticity on Tamil Nadu’s RERA portal.
Conduct a thorough background check of the builder. Check the status of his previous projects. Moreover, remember to check whether they have any legal proceedings pending against them.
Location and Connectivity
Make sure the commercial property you choose is in a well-connected area of the state.
Stamp Duty in Salem
Here are the stamp duty rates in Salem:
|Document Type||Stamp Duty|
|Conveyance / Sale||7% of the market value|
|Agreement relating to building construction||1% of the construction value or the consideration specified in the agreement whichever is higher|
|General Power of Attorney (POA) to sell immovable property||₹100|
|General POA for consideration||4% of the consideration amount|
|Partnership Deed (for capital above ₹500)||₹300|
Registration Charges in Salem
Here are the registration charges in Salem:
|Document Category||Registration Charges|
|Conveyance / Sale||4% on the property’s market value|
|Sales Agreement||1% on Advance money (If possession is given, 1% on total amount is considered)|
|Agreement relating to building construction||1% of construction value or the consideration (whichever higher)|
|General POA to sell immovable property||₹10,000|
|General POA for consideration||1% of the consideration amount or ₹10,000 whichever is higher|
|Partnership Deed (for capital above ₹500)||1% of the invested capital|
Salem Commercial Real Estate Outlook
Commercial real estate investments in Salem have bright prospects as the city has been classified as a Smart City by the Government of India. The Central and the Tamil Nadu Government have joined hands to develop Salem into a commercial and industrial hub with a diverse economic base that would promote equitable opportunities for all.
The authorities are working tirelessly to strengthen the infrastructural development of Salem, which is likely to become Tamil Nadu’s IT powerhouse. . As a result, the industry will inevitably draw more employees from neighbouring regions and states. They are leading to a significant price appreciation of commercial properties.
Commercial Real Estate vs Other Asset Classes
Let us compare investments in commercial real estate with other asset classes:
Commercial Real Estate vs Stocks & Equity Mutual Funds
As the real estate industry is less volatile, commercial properties have the potential to generate more stable returns than the stock market. Although both stocks and equity mutual funds offer the potential for higher returns, they are susceptible to market volatility and can cause losses.
Commercial Real Estate vs Bonds
Both these investment options are stable income sources, but bonds (AAA-rated) have lower credit risk than commercial real estate, where tenants must make timely payments. . Bonds are also more liquid than commercial properties. However, commercial properties offer higher returns in general.
Commercial Real Estate vs Residential Real Estate
Commercial properties have higher demand than residential real estate and are associated with higher rental prospects. However, they are also more expensive.
Commercial Real Estate vs Gold
Though commercial real estate generates good returns, gold is a more secure investment option with higher liquidity. However, its returns are lower in comparison.
Here’s a tabular representation of the differences between the above-mentioned asset classes:
|Parameters||Commercial Real Estate||Gold||Stocks & Equity Mutual Funds||Bonds||Residential Real Estate|
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Steps to Invest in Commercial Real Estate in Salem
Given below are the steps to invest in a commercial property in Salem:
Step 1: Have a clear idea about your budget and conduct market research about the commercial properties you want to invest in.
Step 2: Make a list of these sites and conduct field visits.
Step 3: Select a commercial space as per your investment goals.
Step 4: Check the official documents, such as the title deed, foundation certificate and property assessment extract, before participating in any financial transaction.
Step 5: Complete the stamp duty and registration formalities and transfer the property in your name.
Step 6: Consider taking the help of a real estate broker and an advocate to guide you through the process. . However, this would require you to pay additional fees.
Step 7: Covering your commercial property with an insurance policy is also a good idea.
Salem in Tamil Nadu is set to become a more significant growth driver after its classification as a Smart City. IT, textiles, steel and tourism are the prominent industries in this city. You can consider investing in commercial real estate in Salem if you feel bullish about its prospects.
Frequently Asked Questions (FAQs)
Where can I invest in Salem?
You can consider investing in commercial properties and industrial lands in Yercaud and Deevattipatti in Salem.
What are the different types of commercial properties?
Tourist accommodations, office spaces and workplaces are examples of commercial properties.
What mineral processing industries are present in Salem?
Mineral reserves, including bauxite, magnesite, limestone, iron ore, quartz, etc. As a result, Selam has several cement manufacturers, aluminium smelters, refractory brick manufacturers, etc.
How are Tier II cities expanding their horizons for real estate?
The Central and State Government have introduced various schemes for the infrastructural development of Tier II cities. Moreover, improving educational and medical facilities in Tier II cities and the low investment costs have made investing in real estate lucrative.