Guide for Vijayawada Commercial Real Estate Investment
Vijayawada is the second-largest city in the southern Indian state of Andhra Pradesh, and its economy is quite dynamic. It is a Tier II city that boasts a strong agricultural base and industrial set-up. It has a solid agro-based industry, a flourishing retail and manufacturing sectors. Moreover, 72% of the city’s population work in the tertiary sector.
Vijayawada hosts several prominent industrial hubs. Auto Nagar, located near the Jawaharlal Nehru AutoNagar Estate, is among the largest automobile hubs in Asia. Meanwhile, 900 industrial units and thermal power plants are located in Kondapalli Estate.
The presence of all of these industries stands as testimony to the economic development of Vijayawada. Thus, investing in commercial real estate in this city holds the promise of generating substantial returns.
Here we will explore the crucial details related to commercial real estate investment in Vijayawada.
Top Reasons to Invest in Vijayawada’s Commercial Real Estate
Now, let us look at the reasons why you should invest in commercial properties in Vijayawada in the first place:
A city needs rail, air, water, and road connectivity to develop into a destination of international repute. Vijayawada is well-connected to other areas of the country and is a major transit point between Hyderabad and Visakhapatnam.
The city also houses the second largest junction of the Indian Railways at Rayanapadu. In addition, a deep-water port in Vijayawada is under construction to boost this city’s naval connectivity.
Vijayawada is the financial capital of Andhra Pradesh, and there is significant capital in its markets. Moreover, it has a strong and stable real estate industry as the State Government has eased the rules for Foreign Direct Investment (FDI). In addition, new regulations by the Securities and Exchange Board of India (SEBI) have paved the way for mutual fund investments in the real estate sector.
The State Government has plans to develop Vijayawada, an internationally renowned business city. With that in mind, the State Government has made it mandatory for companies to register the plot details well in advance. In addition, buyers/investors have to be present at the time of the registration of their properties.
Commercial Real Estate Investment Opportunities in Vijayawada
You can consider making commercial real estate investments in the following areas in Vijayawada:
Murali Nagar, a neighbourhood in Vijayanagar with good connectivity, is close to Ayush Hospital. In this region, there are several stores, banks, and supermarkets. Bank Colony, Ramavarappadu, and Srinivasnagar are well-known neighbourhoods close to Murali Nagar. Prices of property in this region start from ₹8,025 per square foot.
Ibrahimpatnam is a beautiful place in Vijayawada with all the necessary amenities like shops, banks, ATMs and educational institutions. Therefore, commercial real estate investments in this area can generate good returns, and prices usually start from ₹2,857 per square foot.
Things to Consider before Purchasing a Commercial Property in Vijayawada
Listed below are the crucial factors to take into account before investing in commercial real estate:
The legal contract that defines the relationship between a property owner and an investor for a certain period. Before signing the contract, you should consult an advocate or a real estate expert to understand better the risks associated with purchasing the property.
Check Authenticity through RERA
RERA is an administrative body formed by the Real Estate (Regulation and Development) Act of 2016, under the Government of India and is present in all states. It has made it compulsory for every builder and developer in India to register their properties’ details on their state’s RERA portals.
If you wish to invest in commercial properties in Vijayawada, check the authenticity of the builder and their project on the RERA website of Andhra Pradesh.
Before investing in a commercial property, you need to consider the location and infrastructural development surrounding it. Properties located near major commercial hubs and educational and financial institutions will generate good returns.
While conducting market research, make a list of properties well-connected with other city areas. . For example, select properties with lifts, emergency staircases, proper drainage and parking spaces.
Check the history of a builder when investing in commercial properties in Vijayawada. Contact previous customers to check their track records and talk to local real estate agents. An important thing to consider is whether the builder has any legal proceedings filed against him.
Stamp Duty in Vijayawada
Given below are the stamp duty rates for purchasing commercial properties in Vijayawada:
|Transaction Type||Stamp Duty Rates|
|Sale of immovable property||5%|
|Agreement of sale||5%|
|Development agreement cum GPA||1%|
|Lease agreements of less than 10 years||0.4%|
|Lease agreements of more than ten years but less than 20 years||0.6%|
|Construction agreement cum GPA||1%|
Also Read: How to Take a Loan Against PF?
Registration Charges in Vijayawada
Given below are the registration charges applicable in Vijayawada:
|Description of Instrument||Registration Charges|
|Release||0.5% (Subject to a minimum of ₹1,000/-and maximum of ₹10,000/-)|
|Agreement of Sale cum General Power of Attorney||₹2,000/-|
|Development Agreement cum General Power of Attorney||0.5%|
|Power of Attorney for Consideration||0.5% (subject to a minimum of ₹1,000/-and maximum of ₹20,000/-)|
|Certificate of sale||0.5%|
Vijayawada’s Commercial Real Estate Outlook
Of all the Tier II cities in India, the real estate sector in Vijayawada is the most promising one, as it is flourishing like no other. Moreover, considering the type of capital circulating in the market, the city is all set to emerge as an important financial hub of the country.
Moreover, the State Government plans to build an IT Park on the 32-acre site located at Kesarapalli near Gannavaram airport. In addition, the district administration plans to construct software parks on lands belonging to the Government Polytechnic College and ITI in Vijayawada. Furthermore, Vijayawada-Guntur-Tenali-Mangalagiri Urban Development Authority and Arihant Foundations & Housing Ltd are jointly constructing a township with commercial complexes.
These measures will generate many employment opportunities, resulting in numerous young people from neighbouring cities and states choosing Vijayawada to start their careers. Commercial real estate investments in this city have bright prospects.
Commercial Real Estate vs Other Asset Classes
Let us compare the returns generated by commercial real estate with other asset classes:
Commercial Real Estate vs Residential Real Estate
Commercial properties can generate better rental income than residential real estate because commercial real estate, such as office spaces, shops and factories, enjoys a greater demand. However, they are more expensive than residential properties.
Commercial Real Estate vs Gold
Gold is considered a more secure investment option than commercial properties as it is relatively less sensitive to market movements. In addition, gold is much more liquid than commercial real estate, which is a significant advantage though its returns are lower.
Commercial Real Estate vs Bonds
Both these asset classes are stable sources of income, but commercial real estate is exposed to higher credit risk than bonds (AAA-rated), as a lot depends on tenants making timely payments. Moreover, commercial properties are difficult to liquidate as searching for a suitable tenant takes time. Despite these factors, commercial properties hold the potential to generate better returns than bonds.
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Commercial Real Estate vs Equity Mutual Funds & Stocks
If we compare these asset classes, we see that equity mutual funds and stocks have the potential to generate higher returns than commercial properties. But there are chances of losses as they are exposed to a lot of risks. On the other hand, commercial real estate generates more stable returns and is less susceptible to market volatility.
Given below is a tabular representation of the returns generated by the various asset classes:
|Parameters||Commercial Real Estate||Gold||Stocks & Equity Mutual Funds||Bonds||Residential Real Estate|
Steps to Invest in Commercial Real Estate in Vijayawada
Here is a step-by-step guide to investing in commercial real estate in Vijayawada:
Step 1: Decide on your investment amount and conduct market research about the potential sites in Vijayawada that are set to undergo infrastructural development in the upcoming days.
Step 2: Make a list of all the sites and conduct field-visits to understand better.
Step 3: Consult a real estate expert to understand the sites’ profitability.
Step 4: Choose a commercial property based on your investment requirements. When financial transactions occur, remember to check the authenticity of essential documents like title deeds, property extraction certificates and foundation certificates.
Step 5: To transfer the property in your name, complete the formalities associated with stamp duty and registration.
Step 6: If you have taken help from brokers and real estate consultants, you need to pay their fees.
Commercial real estate investment holds the potential to generate good returns in Vijayawada. It is a Tier II city in Andhra Pradesh which the State Government wants to transform into a business hub. With an emerging IT industry and increasing infrastructural development, Vijayawada is set to drive South India’s economic development.
Frequently Asked Questions (FAQs)
Which are the areas where I can invest in commercial properties in Vijayawada?
Consider investing in commercial properties in Murali Nagar and Ibrahimpatnam in Vijayawada, as it would generate good returns.
Which commercial properties can I invest in, Vijayawada?
You can invest in Vijayawada’s shops, factories, warehouses, office spaces, and multi-family dwellings.
What are the different ways to invest in commercial properties?
Direct and indirect investments are the two ways to consider investing in commercial properties. While direct investments involve purchasing properties, indirect investments involve investing in REITs (Real Estate Investment Trusts) and stocks of companies that deal with commercial properties.
Is commercial real estate investment a viable option for NRIs?
Investing in commercial properties in India is an attractive option for NRIs because the sector has witnessed a rise in demand in the previous few years. Moreover, there is no limit to the number of properties an NRI can own.