Residential or Commercial? Which is better?

16 Aug, 2021

Two kinds of properties have always dominated the world of real estate. Residential and Commercial. Given that these are the predominant features of the property industry, it is quite natural for many to ask which the better choice when investing is. While there are arguments for both commercial and residential properties, this article will try to shed some light and information about each kind of property, and in the end, try to conclude which is better for investment in 2021.

Return on Investment (ROI)

Both residential and commercial property investments are considered profitable in the current Indian market. But, of course, you cannot place your money on a property and just leave it there for years without any returns on your hard-earned money. Therefore, ROI is one of the most crucial factors to consider when investing your money since you want something in return, especially if you put in your hard-earned savings. ROI refers to the amount of profit (or loss) you gain from an investment, referring to how much money is gained or lost relative to the original value. 

Commercial property can provide a high return compared to residential property. This is because commercial properties are used for business purposes, and due to the nature of business, commercial properties can gain much more profit than residential properties.

Commercial properties are usually located in the CBD of a city or town. They are often used for offices and commercial businesses such as law firms, banks, hotels, gas stations, etc. They are ideal for investment because they have high foot traffic which would mean great potential customers who can turn into potential clients for business. One of the reasons why commercial properties provide a high ROI is because they are easily occupied.

Tenants are willing to pay a lot more per month than residential properties since it's easier to find tenants in CBDs than in suburbs and rural areas. It is also much easier and cheaper for businesses to relocate within the CBD than residential properties. This is because the place is already set up for business, so all that's needed is some minor changes or renovations before moving in. Commercial properties offer many different types of investments, from small offices and retail spaces to luxurious high-rise apartments.

Residential or Commercial Property Investment: Key Markets in India

The Indian real estate market is full of opportunities and attracting many investors. India's real estate market is expected to grow in the future, particularly with the increasing interest among domestic and foreign investors. The government has also made it attractive for property developers by reducing taxes to boost construction activities. However, what is most attractive about investing in commercial property in India is getting a better ROI than investing in residential properties. This is because most Indian cities are growing, and GDP has been increasing, so there will always be a need for commercial spaces.

Cities like Bengaluru, Delhi-NCR, and Mumbai-MMR are the major metropolitan cities in India and are ideal for real estate investments. Many people who invest here enjoy such amenities as business parks, malls, commercial complexes, offices, etc. Major construction activities are being carried out in these metropolitan cities since they have a large population which translates to more potential customers or business clients. These locations are also easily accessible by public transportation such as trains and buses.

Demand will always be high for residential and commercial properties in these cities since both are essential for a metropolitan city to function.

The Growth of Commercial Real Estate in India

{https://realty.economictimes.indiatimes.com/news/industry/should-you-invest-in-commercial-or-residential/69424984} Commercial real estate has been attracting many Indian investors in recent years. There are several reasons for this, but the main factor is the low-interest rates and increasing land prices. Most businesses prefer to stay near important cities or hubs so that it's easier for them to reach potential clients or customers. In the Indian market, the average rental yield falls in the range of 6 percent to 10 percent for commercial properties.

At the same time, it can reach 1.5% to 3.5% or more for residential properties depending on the location. Commercial property investments are also ideal because they are risk-free assets with steady cash flows and stable returns in the long run.

Future Opportunities in Commercial and Residential Market

Commercial and residential real estate markets are expected to perform well in the future. This is due to the ongoing economic expansion that India has been experiencing and urbanization and growing population. So, investing in either of these real estate types is a wise decision. Commercial property investments are less risky when compared with residential properties because they offer steady cash flows and years of stability.

Suppose you are thinking of investing in the Indian real estate market. In that case, there are several factors that you must consider first before deciding on whether to go for commercial or residential property investments. Such factors include the location, timing of your investment, and the price offered.

However, if you are to invest in commercial real estate for rental purposes, here are some locations that you need to consider:

Cities such as Bengaluru, Delhi-NCR, and Mumbai-MMR are getting huge investments from domestic and foreign investors because of their future potentials. Many people who invest here enjoy such amenities as business parks, malls, commercial complexes, offices, etc.

These are some of the biggest cities in India and have a large population which translates to more potential customers or clients for businesses. These locations are also easily accessible by public transportation such as trains and buses.

Residential or Commercial? Which is better?

Here ends our guide Residential or Commercial?. The Indian real estate industry is cyclic. Thus, the best time to invest would be during the downturns and recovery periods. Get started with your property investment by choosing your city and the type of property that interests you.

Then, make sure you do your research, compare prices and the location of properties before making a final decision. At this point, you have all the necessary information on choosing between commercial and residential property investments in India. Invest wisely by drawing up a solid plan for your future goals.