What to look for when purchasing Industrial/ Warehousing land?
Let’s break this down into 2 parts – one on attributes and the second on financials in industrial/ Warehousing land
Part 1 – Attributes:
- Location – look for land that has Urban planning proposals – it should come into the city limits
- Location – Buy land in an upcoming area with long-term potential and be capable of being converted for residential/ commercial use in about 25-35 years as this is the lifetime of your warehouse/ factory building
- Location – the land should have great connectivity to existing state and national highways and upcoming expressways. Public transport should be available today
- Road width – the land should be on a minimum 40’ wide road on government records with tar laid for at least 30’ end to end currently
- Safety & Security – buy land that is part of a plotted development/ industrial layout to ensure that you are in a gated community that ensures similar development and has an ecosystem that benefits all
- Maintenance should be available for roads, lighting, cleanliness, landscaping, etc. for the plot and its surroundings
Part 2 – Cost Analysis:
- The land must be in good shape to achieve max FSI and ground coverage
- Land with no/ low filling costs is a great investment.
- Power infra – Getting power lines and installing infrastructure is a very expensive affair for any landlord
- Conversion and zoning – property conversion is expensive and it takes a lot of time add interest costs on your land value until the process is completed
Sample to show how the cost can vary depending on the points discussed above:
| Cost analysis per acre | Property 1 | Property 2 |
| Property price | 1,25,00,000 | 1,75,00,000 |
| Conversion cost | 10,00,000 | Converted and zoned |
| Filling cost – 10 lakhs/ foot | 30,00,000 | 10,00,000 |
| Power Infra | 15,00,000 | Transformer available |
| Total land cost | 1.80 crores | 1.85 crores |
| Ground coverage (FSI) – sft | 20,000 sft per acre – odd shaped land | 30,000 sft/ acre – pure rectangle land |
| FSI cost per square foot | Rs 900/ sft | Rs 620/ sft |
From the sheet above you can evaluate that while property 1 seems cheaper by Rs.50 lakhs per acre at the time of buying and also cheaper at every stage – it eventually turns out more expensive than property 2. This only shows that we have not done enough research.
Further, the rental is paid on the ground coverage area (FSI) and Property 2 is a whole lot more efficient – It delivers nearly 50% more efficiently than property 1 because of the shape, conversion cost, filling cost, and infra available. A buyer needs to take that extra time to evaluate the property with all the above said parameters and then decide on the investment.
Let’s translate this into RoI below:
| FSI cost per square foot | Rs 900/ sft | Rs 620/ sft |
| Construction cost/ sft | Rs 1600/sft (more vacant land to concrete) | Rs 1500/ sft (less vacant land to concrete) |
| Total cost per sft | Rs 2500 | Rs 2120 |
| Rental per sft | Rs 18/ month | Rs 18/ month |
| RoI | 8.65% | 10.2% |
The table speaks the whole story – land is just not about the price!!
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