In India, pre-leased commercial property investments are on the rise. If you are looking for a real estate investment that consists of high returns and lower risks, then commercial real estate investment is the answer. In India, pre-leased commercial real estate has witnessed significant traction.

There are various types of pre-leased commercial real estate investments. Shops, warehouses, schools, office spaces, retail, etc. Each of these comes with its own pros and gives you a specific set of returns. In this article, we are going to talk about bank pre-leased properties and what they have to offer.

What are bank pre-leased properties?

We know what a pre-leased property is. Well, for an overview, pre-leased properties are those which are already having tenants at the time of sale. So, if you buy the property, you earn the rental income that the property generates. Now, a bank pre-leased property is a traditional property that you buy, with just a bank as a tenant in it.

Many big banks in India, which include privatized banks as well as nationalized banks generally opt for rental properties. This is because-

a) They don’t have to deal with the maintenance of the property.

b) It becomes easy for them to expand their business by leasing more properties and establishing more branches in an area

c) It doesn’t have to sink a huge amount of its funds into a fixed asset all at once, rather it can pay monthly rentals and save the rest of its money for other business operations.

Benefits of investing in a bank's pre-leased properties:

Bank pre-leased properties are advantageous in multiple ways. Along with the bunch of pros that other pre-leased properties offer, banks have their own significant set of rewards to give. Let's check them out-

• Trustability- Banks are the most trusted tenants and organizations. The bank sector in India has gained profit momentum from the financial year 2021-2022. On the back of the lowest balance sheet stress in a four-year period, the banking sector's profit after tax (PAT) grew by 86.9 per cent year-on-year (YoY). Having such important and positive business profits, banks are trustable for timely rental payments.

• Safe pre-leased investment- Banks are considered quality tenants. All the nationalized as well as privatized banks are not sensitive to economic factors, like retail pre-leased properties. For example, during the pandemic, the retail malls had zero footfall due to the restrictions. Hence, the mall business faced major losses. But, when it comes to the necessary assets such as hospitals and banks, in any given situation they don’t lose their business. They become safe tenants.

• Opportunistic location- Bank pre-leased properties are generally road-facing and are situated on the ground floor. Bank pre-leased property investments located near the peak marketplace can be beneficial for many future aspects. As these properties have good footfall being at prime locations, you have the flexibility to keep retail shops/malls, hospitals, and warehouses as tenants in the future.

• Long-tenures- Bank pre-leased properties come with long-term lease tenures of 10+ years. This ensures a stable rental income for a prolonged period. Though the annual rental yield ranges from about 4%-5%, it comes with trustability, long-term stability, and future opportunities.

• Minimum interior costs- Most banks do the property interior themselves. This is why they only need a bare shell unit which is also good for the landlord. As the banks do the interior on their own, they opt for longer lease terms.

Amazed right? Now let us look into the process of buying the bank-preleased property-

The process is not different from buying a regular property. There are simple steps that you need to follow-

1) The token amount: The token amount is an advance payment/downpayment of the property. Which costs around 5%-10% of the total property value. This is the first step to freezing the deal.

2) Documentation: This is a very important step while buying any property, be it residential or commercial. The land or plot should be in a commercially recognized zone if it's a commercial property. Hence, a lawyer's advice is needed before moving forward with the further process. Once the deal is locked, you get the documents of the property. Some of which are as follows-

3)Sale deed: This is a crucial legal document that acts as proof of transfer of ownership from the seller to the buyer. Sale Deeds must be registered by law. To ensure that the various terms and conditions agreed upon by the buyer and seller are followed, the sale agreement must be executed prior to the execution of the sale deed.

4) Parent deed: The parent deed or mother deed helps to trace the antecedent ownership of the property if the property had various owners in the past. It helps a lot in the change of ownership. Mother Deed includes the change in ownership of the property, be it through sale, partition, gift, or inheritance. It is very important that the Mother Deed records the references to previous ownership in a sequence and should be continuous and unbroken. In case the sequence is derailed, one should update the sequence till the latest owner by checking the records with the registrar.

5) Encumbrance certificate: It is a document that confirms whether a change in ownership or new liabilities have been created on a property that is being used as security for a home loan. ECs are comprised of all the property transactions registered during the period for which the EC is requested. It is a certificate that demonstrates the purchase/sale of real estate, the existence of transactions, or mortgages over a particular period of time. An EC can be obtained by submitting a copy of the Sale Deed.

6) Power of Attorney: A POA/Power of Attorney is a deed to transfer all the property rights from the owner to the other person on his/her behalf.

7) Stamp duty: Stamp Duty is a tax, similar to sales tax and income tax collected by the government, and must be paid in full and on time. A stamp duty paid instrument/document is considered a proper and legal instrument/document. The liability of paying stamp duty is that of the buyer unless there is an agreement to the contrary.

If there are any circumstances where there is an issue with the deal or the paperwork, your token amount gets refunded. If the entire documentation is clear, you then sign an agreement to sell or a term sheet.

What is a term sheet?

A term sheet consists of the timelines in which you are going to pay for the property. You see, commercial properties are big ticket size investments. Many people can’t afford to pay a one-time full amount. So many prefer to do part-payments.

For instance, if a property costs Rs. 90,00, 000, you would let's say pay Rs. 30,00,000 for 3 months each and complete the payment. Or whatever time period suits your financial budget to pay the entire amount.

On the last day of your payment, the property’s ownership is fully transferred to the buyer and the lease agreement is also renewed.

Now, what is a lease agreement?

Here we are investing in a pre-leased property. Hence, it is obvious that it has a tenant in them. So, the lease agreement that the tenant had with its previous owner will be revised and transferred to the new owner. So that the rental transactions are the new owner’s authority.

That’s it! Bank pre-leased property investments are simple, with a minimum investment process and lots of benefits! But did you know? You don't have to worry about taking even that much effort also! You can rely on us for that! We have the best pre-leased bank properties for you, and also help you with your documentation, and deal flow and get you the latest financial metrics to make your investments from better to the best.

Now that you have read so much about the bank's pre-leased property investments, it’s just going to take you 60 seconds to check out these properties on our website! Head to our pre-leased property page and start your investment journey with us!