The success of any commercial business depends on the yield or returns from an investment. You can enhance the ROI potency by performing each essential task, such as planning, cost management, and execution, carefully. With the day-to-day rise in material costs, construction costs are also increasing consecutively. You have many more things to know before starting a business.
Read this blog to learn useful tips to increase ROI in commercial building projects.
What is the ROI on Commercial Real Estate?
You can understand ‘commercial property return on investment‘ as one of the important metrics to measure the profitability of an investment. You can calculate ROI by using the following standard formula.
ROI = (Net Annual Income ÷ Total Investment Cost) × 100
Breakdown of the terms in the formula:
- ‘Net Annual Income,’ also called ‘Net Operating Income (NOI)’ is the income generated by the property after making deductions of all operating charges, like property taxes, insurance, maintenance, and utilities.
Net Annual Income = Gross Rental Income – Operating Expenses – Taxes – Vacancy Losses – Insurance
- The total investment cost includes all charges you paid to obtain the property. It includes land, construction, fees, interest, fit-outs, and marketing charges.
Total Investment Cost = Land + Construction + Fees + Interest + Fit-Outs + Marketing
Based on the AssetMonk research paper, the typical ROI benchmarks (rental yields) for Grade-A commercial properties in India for 2024 are as follows:
- Bengaluru: 7.75%
- Mumbai: 7.75%
- Delhi NCR: 8%
15 Best Tips to Maximise ROI on Commercial Property
The following tips will help you to maximise ROI on commercial properties.
1. Optimise Land Acquisition and Location Selection for a Commercial Property
Selecting the right city and micro-market is critical to achieving optimal ROI. Land acquisition can represent 20% to 50% or more of a total development budget, depending on local real estate prices. In metro cities, land costs typically include anywhere from 50% to 85% of the total project cost. Therefore, it is important to balance acquisition price with development potential.
Selecting commercial properties near established business hubs can help attract more tenants. If possible, choose a property near metro lines and highways to ensure both workers and customers have easy access. This way, you can enhance your property value by 10–15%, attract more leasing customers, and keep the space occupied for a longer period, thereby minimising the risk of leaving space vacant.
Also, making investments in areas with planned infrastructure developments like metro lines, logistics hubs, and industrial parks backs long-term capital appreciation and promotes sustained ROI growth.
Pro Tip: Always prioritise areas with upcoming Special Economic Zones (SEZs), IT Parks, or planned smart cities (e.g., Dholera, GIFT City, Navi Mumbai) for superior growth prospects.
2. Choose the Right Commercial Asset Type
You can acquire the best ROI by concentrating on the type of commercial property. Each type offers different returns, lease stability, and entry costs. Choose based on your capital, experience, and risk appetite.
In India, ROI varies significantly with asset type:
| Asset Type | Capex/Sq.Ft (₹) | Avg Rent/Sq.Ft (₹) | Rental Yield (%) |
| Office Space | ₹3,000–5,500 | ₹90–150 | 8%–9% |
| Retail Showroom | ₹5,000–10,000 | ₹150–400 | 8%–10% |
| Co-working Spaces | ₹3,500–7,000 | ₹80–160 | 7% -11% |
| Warehousing | ₹2,000–3,500 | ₹22–38 | 5%–10% |
You need to carefully choose asset types that align with local demand and zoning laws.
3. Design for Maximum Leasable Area and Flexibility
When purchasing or constructing a commercial building, investors should consider an optimised design that maximises the leasable area. This will directly enhance the possibility of achieving higher rental income. Gross Leasable Area (GLA) is the essential measurement in real estate that quantifies the total floor space available for lease, excluding common non-leasable spaces. Hence, understand how GLA applies to commercial spaces and design accordingly.
- You can increase Floor Area Ratio (FAR) usage by reducing common area wastage. This can be achieved by combining service and circulation cores and including flexible, column-free floor plates, which can attract a wide variety of tenants to increase ROI.
- According to Teriin research paper, designing for daylight and energy efficiency can considerably impact a building’s energy use by reducing lighting energy demand by 20–30%.
- Follow India’s Energy Conservation Building Code (ECBC) to achieve 25-50% energy savings in compliant commercial buildings.
4. Exit Strategy and Capital Appreciation
Investing in commercial property in India is mainly driven by two factors: rental income and capital appreciation (the increase in property value over time). To get the best returns, it’s important to have a proper exit strategy, knowing when and how to sell your property, especially when market conditions are favourable. To improve liquidity and returns, investors can consider Real Estate Investment Trusts (REITs), which allow easier buying and selling of shares in commercial properties.
5. Incorporate Green Building Features (IGBC/LEED)
You can integrate features of green building certified by IGBC, LEED, or GRIHA in Indian commercial properties to gain tangible benefits. According to CRISIL, tenants with green building features can save up to 30%–35% in energy costs. Colliers and CREDAI data show that in cities like Mumbai, Chennai, and Hyderabad, rental premiums for such spaces are 14%–24% more. This means that eco-friendly design not only benefits the planet but also significantly boosts your ROI.
6. Minimise Cost of Capital
The interest expense for a partially financed property, such as one with a 50% loan-to-value ratio, can significantly decrease the net return on investment (ROI), particularly if the loan has an uncompetitive interest rate or a suboptimal structure. Higher interest rates lead to increased borrowing costs, which in turn reduce profitability.
Consider these tips to lower costs:
- Choose loans with lower fixed interest rates (typical range: 8%–13% in 2024–2025).
- Consider Real Estate Investment Trust (REIT) partnerships or fractional ownership for diversified, lower-cost funding.
For large projects, consider External Commercial Borrowing (ECB), where you will raise funds from foreign lenders. The Reserve Bank of India (RBI) set terms on ECB, establishing guidelines on who can borrow, how much, and for what purposes.
7. Lease Strategically for Commercial Property
You need to prepare a mindful plan for leasing to increase cash flow and stability in commercial property.
You can follow these best practices:
- Long-Term Leases: Always prioritise specifying the lease term to a minimum period of 3 to 9 years, along with annual rent escalation clauses of 5% to 7%. With known and longer lease periods, you can receive expected and steady cash flow, reducing the risk of frequently vacating tenants, saving time and costs spent on finding new ones.
- Choose Anchor Tenants: Anchor tenants are prominent, large businesses that serve as a major draw for a shopping center or other development. Always rent to them like MNCs, banks, or retail chains to get financial stability and attract more footfall or interest in your property.
- Transparent Lease Agreements: Clearly mention rent terms (monthly or yearly), based on market rates or inflation adjustments to avoid disputes.
- Consider Built-to-Suit (BTS): By offering built-to-suit spaces, you can demand higher rents and secure long-term leases by giving tenant satisfaction and retention.
8. Reduce Operating Expenses (OPEX)
Operating Expense Ratio can be calculated as,
Operating Expense Ratio (OER) = Total Operating Expenses ÷ Gross Operating Income
Your OER can be decided based on your property type, area, and market fluctuations, typically ranging from 30% to 50%. Minimal range of OER (about 30%) means better operational efficiency.
You can reduce operating expenses by:
- Making an investment in energy-efficient systems like HVAC, LED lighting, and Building Management Systems (BMS).
- Installing solar panels.
- Outsourcing Integrated Facility Management (IFM) streamlines operations, further lowering recurring expenses and improving overall profitability.
9. Comply with Regulations to Avoid Delays
The main reason for the project timeframe extension is a delay in receiving necessary permissions.
You need to obtain the following clearances:
a. Environmental Clearance
If you are working on a large-scale construction project, make sure to examine the structure’s environmental impact and get approval from the right bodies.
Projects are categorised, with
- Category A projects have a high impact, requiring central government clearance and a comprehensive Environmental Impact Assessment (EIA), including public hearings.
- Category B projects have localised impacts and require clearance from the State Environmental Impact Assessment Authority (SEIAA).
- Category B1 – Construction projects exceeding 150,000 square meters or township and area development projects over 50 hectares require an EIA report.
This ensures the project’s sustainability and does not harm the environment.
b. Fire Safety NOC
According to the 2016 National Building Code (NBC) of India and state-specific fire safety laws, it is mandatory to get an NOC from the fire department. It confirms your building involves emergency exits, fire extinguishers, and evacuation plans.
This NOC assures that the building is safe in case of a fire.
c. Local Body Permits
Before initiating any commercial project, make sure you get the permits from the respective municipal or local government bodies. This way, you can prove your project is going on as per local zoning laws, building codes, and infrastructure requirements.
d. Occupancy Certificate (OC)
Before handing the structure over for occupation, the tenant needs to have OC to confirm that the structure is safe, habitable, and built based on all regulations.
If any of the above clearances are delayed, it can add 6–18 months to the project timeline.
If any of the above clearances are delayed, it can increase the project timeline to 6–18 months. This can increase the overall capital expense by more than 10%. In addition, failure to obtain the above clearances can make you pay large fines, face legal action, or even halt the project.
Based on the study conducted by Dr. Madalasa Venkataraman, land with a clear and guaranteed title is typically priced 4–5% higher than land with uncertain ownership. Projects with title issues or legal disputes, on the other hand, will be available at significantly higher discounts, sometimes above 20%, due to diminished marketability and increased risk. A clean title is vital for commercial property in order to achieve best pricing, attract tenants, and get financing.
10. Use Cost-Efficient and Durable Materials
The quality of materials used in commercial building construction can impact initial construction costs and future maintenance charges. Choosing high-quality building materials is better for yielding substantial savings and improving asset value, directly improving ROI.
Recommended Materials for Construction:
- Precast Concrete: Supports a faster pace of construction and reduces labour costs, which is crucial in high-labour-cost regions. Prefabricated components also mitigate site waste and promote faster timelines.
- AAC (Autoclaved Aerated Concrete) Blocks: Offer superior thermal insulation, lowering HVAC loads and energy bills. AAC blocks are lightweight, which reduces structural load and foundation costs.
- Energy-Efficient HVAC Systems: Though the initial cost is higher, these systems reduce operational energy costs considerably over the building’s lifecycle.
- Low-Maintenance Finishes: Choose high-quality materials with better finishing to reduce repair and ongoing maintenance charges.
11. Make use of Technology and Automation
Smart building technologies are reshaping operational efficiency and tenant experience in Indian commercial real estate.
Technologies to Consider:
- Building Management Systems (BMS): Centralise control of HVAC, lighting, and security for optimal efficiency.
- Energy Monitoring Systems (EMS): Enable real-time tracking and optimisation of energy consumption.
- IoT-Based Lighting and HVAC Controls: Automate energy use based on occupancy, further reducing utility bills.
- Touchless Entry and Security Systems: Improve tenant safety and appeal, especially post-pandemic.
According to global industry studies, smart-enabled commercial buildings can save up to 30% energy costs, keeping tenants for longer periods because of better comfort and efficiency.
12. Phase the Project Smartly
Phased construction is a proven strategy in India for managing cash flow and market risk.
Benefits:
- Revenue from early phases (e.g., Phase 1) can help fund subsequent phases, reducing reliance on external debt.
- Allows for plan adjustments based on real-time market feedback.
- Limits exposure in uncertain or fluctuating markets.
Example:
For a ₹50 crore project, breaking it into two ₹25 crore phases can lower loan interest and provide flexibility to adjust to market changes.
13. Reduce Downtime and Vacancies
Vacancy periods deteriorate annual ROI. Proactive leasing and marketing are essential.
Action Points:
- Start marketing and tenant outreach throughout construction.
- Hire property advisors or leasing firms with excellent local connections.
- Use virtual tours, detailed brochures, and ready-to-move layouts to attract tenants faster.
14. Monitor Construction Timelines Closely
If different reasons cause any delays, it can directly impact the cost overruns and minimal ROI. You can plan a practical project timeline and monitor it using these tracking tools:
- Gantt Charts: Visualise project timelines and dependencies.
- Project Management Software (Primavera, MS Project): It allows you to track progress, manage resources, and identify delays.
- Weekly Site Audits: Ensure on-site compliance with planned schedules and conduct regular contractor performance reviews.
15. Partner with the Right Construction Company
Choosing a reliable construction partner is one of the most critical steps in maximising ROI. A professional company with proven expertise ensures accurate cost estimation, timely project delivery, quality workmanship, and compliance with building codes—all of which directly impact long-term returns. If you intend to construct a commercial building for a hassle-free experience, get in touch with Brick & Bolt. They offer comprehensive commercial services for commercial projects like retail shops, office spaces, and hospitality facilities, etc.
Their special features are
1. Quality Control: Brick & Bolt uses an innovative Quality Assessment System (QASCON) that includes over 470 quality checks, ensuring quality control and high standards at every stage.
2. Escrow Payment Mechanism: Brick & Bolt employs an escrow payment system, which provides clients with total financial safety by releasing payments to contractors only after significant milestones are reached.
3. Customised Floor Plans: You can speak with Brick & Bolt’s skilled architects for specialised advice and solutions. With over 11,000+ Vaastu-compliant and customisable floor plans, bespoke designs that suit project budgets and individual preferences are created.
4. Total Ownership: Brick & Bolt takes full responsibility for your project from the earliest stages of its development to its successful conclusion. Since we manage every detail internally, your commercial building will be built precisely to your specifications, on time, and within the allocated budget. There are no price hikes or undeclared costs after the contract is signed.
5. Tech-Enabled Platforms: To efficiently handle large-scale commercial projects, the company makes use of cutting-edge 3D modeling technology. You can view your commercial structure before it is built and track its development online. These tools provide real-time updates so you can monitor your project at all times, simplify construction processes, and enhance stakeholder participation.
6. Structural Warranty: Brick & Bolt presents a 10-year structural warranty for the superstructure and substructure, guaranteeing that the building is free from any issues.
7. Contractor Network: Brick & Bolt has a strong network of contractors and subcontractors to ensure the project is completed on schedule and to a high standard.
In conclusion, maximising ROI in commercial real estate requires a well-rounded, strategic approach, from selecting the right location and asset type to optimising design, leasing smartly, and managing construction efficiently. Investors must focus on energy-efficient technologies, green certifications, and regulatory compliance to control costs and boost rental yields. Smart planning also includes phasing projects, reducing vacancies, and choosing durable materials to minimise maintenance expenses. Partnering with a reliable construction company like Brick & Bolt ensures high-quality execution, cost transparency, and timely delivery. By combining financial insight with practical execution, you can build commercial properties that offer strong, long-term returns on investment.