A campus. An office complex. Even a floor in a commercial building. Watch out for four-walled properties as an investment class to outclass many of the others that have already been overinvested-in. Commercial real estate offers direct income to live on, and, for worrywarts, inflation protection.

It also offers the psychic benefits of owning something you can touch, feel, look at and film for posterity. "Our Indian psyche," says Sanjay Verma, Joint Managing Director, Cushman & Wakefield, "is to own tangible assets." This applies to residential property as well. From an investment perspective, though, there's a difference. Housing simply does not match commercial property's upside potential for yield. A neat bungalow could yield some five to seven per cent per annum in rent, compared to 11 to 13 per cent (post-tax: eight to nine per cent) from a swank cubicle farm in a 'business district'. Home tenants mostly aspire to own their own pad, which caps the return, while organisations often avoid anchoring money to the ground. Businesses prefer leased premises.

But property picking is never an easy call, with vague parameters such as 'prestige' playing a major role in appreciation potential. Also, there are almost no 'small lot' opportunities. In other words, you're best placed to make money in this business if you meet two criteria. One, you have a fine sense of the sort of office space sought by image-conscious blue chips. Two, you are a high networth individual with at least a couple of crore rupees to put in.

Leveraged Assets

The interesting part is that you can leverage debt to create assets. Translation: if you have Rs 3 to 4 crore to invest, you can buy a property worth Rs 10 crore, the rest being raised as debt from banks. "This is the classic way of creating assets by leveraging debt," says Verma. Here, your rental income will cover the mortgage payments and at the end of the term (usually as long as the lease period which ranges from three to nine years), you can sell the property at a profit or retain it for further rental income.

How does investing in equity or debt compare with investing in commercial property? Let's take the current scenario. Stocks, despite the recent crash, are ruling close to historic highs. There are some good picks for sure, but it still takes a high risk appetite to enter the market at these levels. For those already invested in equity, this is the time to book profits on at least part of the portfolio. As for bonds, the returns are no longer so attractive. Mutual funds gyrate along with stock and debt markets. Commodities, too, fluctuate in value. Fixed deposits barely keep your real value intact, after taking inflation into account.

CHECKLIST

» Only buy properties that can generate rent income » Check the quality of tenants-balance sheet onwards. » Don't buy if the market is overheated from recent deals » Check that all titles, deeds and legal requirements are clean » Seek the advice of established real estate consultants

Commercial real estate in hot locations, however, offers a heartening eleven to thirteen per cent return on investment-and this so-called 'yield' (by way of rent) is on the assumption of zero capital appreciation. If the market value of the property rises, it's a bonus. Which is what the most exciting aspect is, actually, and the good news is that the likelihood of this happening goes up in proportion to the boom in commercial activity. India, analysts of investment cycles reckon, seems to be on the verge of another burst of such activity-what with so many more multinationals, domestic it firms and business process outsourcing (BPO) units looking to set up shop.

Location Active

So, where to put your money? Mumbai, Delhi, Bangalore, Kolkata, Chennai, Hyderabad and Pune are the hotter bets, other than multinational-attracting satellite towns such as Gurgaon and Noida. Beyond that, much depends on your finer assessment of the sort of tenants the location would attract. Remember, office-sensitivity is rising fast. It's peer pressure. More than a decade after the multinational (MNC) influx, ramshackle old offices are now deemed an image liability. So turn into a property snob. Does the building match what people expect across the world in terms of appearance and amenities? Is an airport closeby? Are the connecting roads speedy and smooth enough for a General Electric chief, say, not to miss the airport-to-office helicopter transfer he gets in places like Tokyo?

The good news is that you can minimise risks by buying a property that's already up and buzzing with tenant activity. If your tenant is a Fortune 500 or a 'aaa' rated company, you could access bank debt far more easily. Loan terms tend to coincide with lease periods (three to nine years). If you have Rs 5 crore to invest, you could take a loan and buy property worth Rs 15 crore.

The risks? A sudden tenant departure. "One cannot be sure how long these companies will stay," says Sunil Agarwal, formerly with real estate consultancy Colliers Jardine, and currently Head, Strategy and Business Development, DS Group, "In the case of multinationals, some may decide to exit India for strategic reasons." The best hedge against this is to make a sensible location pick, which could mean plonking down upwards of Rs 10,000 per square foot.

And Another Door

Another way to play this market is to get into construction finance. If you are highly liquid and are not averse to dealing with builders, you could lend them money. The building acts as collateral, and you earn interest of 10 to 10.5 per cent per annum. Alternatively, you could become one of the financial investors in a construction project. But don't go close without due diligence, cautions Anshuman Magazine, Managing Director (South Asia), CB Richard Ellis. But then, that goes for any investment.

File Those Taxes

Presenting a quick guide to an important task-filing your taxes.

By Narendra Nathan

First of all, don't dilly-dally. If you haven't got your tax-filing house in order, do it now. You might find the following tips helpful:

The most important word in filing taxes is an eight letter one: deadline. This is set by the government's Income Tax Department, so make sure you stick to it. For salaried and other assessees who don't need an audit (such as professionals whose income is below Rs 10 lakh, small business with turnover below Rs 40 lakh), the deadline is July 31. For others, it is October 31. There's a penalty on missing the deadline. Further, if you slip up, you could lose the benefit of either carrying losses recorded in a certain period forward to the next year or setting them off against other classes of income-and end up with a higher liability.

Do you have your Permanent Account Number (PAN) handy? If you still do not have a PAN number-and a card bearing it-then you had better apply for one immediately. Other financial transactions increasingly ask for your PAN number.

Before filing your returns, organise your papers. If salaried, you need your 'Form 16', a document furnished by your employer with details of all the tax it has deducted ('at source') from your salary during the financial year and given to the government. Check if the form contains your own PAN, as also your employer's tan (Tax Deduction Account Number). You need similar documents for other investments that require taxes deducted at source. A bank, for example, would deduct tax on interest income on a fixed deposit. You also need documents for all other income. For example, the rent agreement can act as proof for rent receipt.

Papers in place, do the 'taxable income' calculat-ions to see if you owe the department any more tax (which you can pay through any designated bank such as SBI). Next, do a prudence check for a possible 'scrutiny' alert. Is income suspiciously out of whack with expenses anywhere? For example, eyebrows could be raised if you have property on rent for Rs 50,000, but are claiming expenses on it of Rs 2 lakh.

Next, ensure that you declare your complete income. A common error is in not declaring the receipts that are exempt from income tax (like interest earned on tax-free instruments, money received from insurance companies, gratuity received). "Declare all these receipts and claim exemption (under respective sections), instead of avoiding them," advises Viren Pandya, a Mumbai-based chartered accountant. You don't want a headache if faced with a scrutiny years later.

Go and file your documents at the income tax office of your circle. If salaried, your employer could do a bulk filing (under the Suvidha scheme) for several of you. One advantage is the speed with which you get your refund cheque (if you've paid excess). "We have helped Wipro file returns of around 6,000 employees and the refund cheque came in just four months," says Prasad Rajappan, CEO of Filemyreturns.com.