Commercial vs. Residential Properties in India

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Commercial vs. Residential Properties in India

• BY Thomas Andrew

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Introduction

• In India, the real estate market is mostly
  composed of buyers and sellers, with both
  commercial and residential real estate considered
  as great investment options.
• And both of these have a great impact on the
  total net worth.
• However, a vast majority of people only prefer
  residential properties for investments rather
  than the commercial.
• A residential property comprises of apartment
  buildings, flats, individual houses or
  multi-family homes, condos and co-ops.
• And commercial property comprises of all the
  non-residential buildings like offices, retail
  shops and other industrial units or factories,
  etc.

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Difference between Residential and Commercial
Properties

• Residential properties

• Commercial properties

• Short Term Leases The commercial property leases
  are usually made for a Short period of time.
• GST Impact This is not applicable for
  residential properties.
• Maintenance Costs This cost is not paid by the
  lessee, at least, not as much as for commercial
  properties.
• Location It is always advisable to invest in a
  property which is in a good area, offering
  excellent transportation.
• Rental Returns The rental returns for any
  residential property is lower when compared to
  the commercial property.

• Long Term LeasesThe commercial property leases
  are usually made for a longer period of time.
  Commercial leases are usually made for several
  years.
• GST Impact The Goods and Services Tax (GST) is
  only applicable for a commercial property, which
  allows an extra 10 on the propertys purchase
  price.
• Maintenance Costs The maintenance costs, rates
  and repairs on a commercial property are paid by
  the lessee and not the landlord.
• Location The propertys location plays a vital
  role in the success of any commercial property.
  It is always advisable to invest in a property
  which is in a good business area.
• Rental Returns The rental returns for any
  commercial property is higher when compared to
  that of a residential property.

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Benefits of Investing in Commercial Property

• Longer lease period, starts from 2 or 3 years to
  20 years. Very often, they are secured by bank
  guarantees.
• The maintenance of a commercial property tenant
  is far better, as the look and condition of the
  property is important for their businesses.
• The commercial leases have the protection for the
  owners in the form of good clauses maintenance
  clauses and the management clauses.
• The return on capital for investments in a
  commercial property is around 7 to 10 net of
  all costs.

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Benefits of Investing in Residential Property

• The most important aspect of investing in a
  residential property owes to its smaller deposit.
  Based on the income and credit history, one can
  borrow up to 100 of the purchase price. In
  commercial mortgages, a deposit of at least 30
  is required.
• Rates on mortgages for a residential property are
  lower when compared to that of a commercial
  property.
• Commercial property lenders are stricter and any
  delays in the property dealings can incur GST
  charges.
• Commercial property markets are less predictable
  than the residential market.
• Easy lease agreements in the case of residential
  property. And the vacancy time of the property is
  low, whereas in the case of commercial property
  it takes months or sometimes years to find a new
  tenant.

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• In India, one can obtain a commercial property
  which has an existing tenant of several years to
  go in an existing lease agreement.
• Such a commercial property can bring in a profit
  of about 11 to 13 per annum, whereas in the
  case of residential property investments, the
  profit is just about 3 to 5. Usually the
  residential and commercial real estate cycles
  works differently.
• So, if there is an existing investment of a
  residential property, then it is better to make
  the next investment in a commercial property,
  which moves according to a different market
  cycle.
• For example, in the case of Mumbai, the
  residential property prices are in peak whereas
  the commercial property prices are just about
  average.
• Apart from that, the tax benefit one may incur
  from a residential mortgage is higher, whereas it
  is non-existent in the commercial aspect.

For more
http//www.sivagalerija.com/commercial-residential
-properties-india/