What should be the land price for a warehouse rental of Rs 15/sq.ft?
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This is a million dollar question! This question is basically about RoI – return on Investment on?warehouse for rent in Chennai.
The cost of the warehouse determines the monthly rental quite clearly
The Return on Investment should ideally be higher than the PLR – Prime Lending Rate for the same to be profitable and workable for an investor.
So let us break down the cost of the warehouse into 3 parts
Also assume that we find a tenant who commences payment of rental from 1st?April 2022. Then the holding cost should be calculated until 01st?April 2022.
Let us assume that the PLR – Prime lending rate is 9%:
This therefore amounts to Rs 300/ square foot on the total built up from the day of land acquisition until the date of rent realization
Therefore now we have a total cost to build a warehouse per square foot of Rs 550+1350+300=Rs 2200/ sft
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The RoI that an investor should get should 1% higher than PLR, therefore at 10% RoI the annual rental should be Rs 220 or Rs 18.30 per month
Now coming back to the question, you need to know that warehouse construction costs are standard for your city. There could be a 5% variation.
Now lets picture this – Rental rs 15/sq.ft/month
Annual rental: Rs 15×12 months = Rs 180/ sft
At a 10% RoI, your cost cannot exceed Rs 1800/ sq.ft
Therefore:
This is precisely on how you can achieve a 10% RoI at the Rs 15 rental with a land cost of Rs 1 crore, keeping in mind the increasing demand for?Warehouse for rent in Chennai. Hope I have answered this well.
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