Commercial or Residential Property Which Investment Is the Best?


Posted on 01st August 2017 Author: Planet Homes



The real estate industry in India is teeming with huge investment opportunities, thanks to the constructive policy measures implemented by the government and a strong economy. The tier II and tier III cities have been getting a digital makeover with the smart city mission and people are equally enthusiastic about the investment opportunities in these cities. Investing in real estate is the one option which can give you a significant level of security as well as price appreciation.

Amazing opportunities for investment in real estate

And it is not just the residential property schemes where you can invest! There are many avenues where you can invest and earn maximum benefits at very low risk. Today, you can easily invest in residential real estate and vacation homes; commercial real estate including retail, office and industrial units; REITs; land and parking space; and you can effectively augment your income sources.

Investing in residential and commercial real estate are however most popular option as they attract investment from common folks as well as established investors.

Sometimes, one might get confused that in which property the investment should be done. Let us understand its pros and cons to invest in them with the necessary precautions.

The advantages of investing in residential real estate

The investment decision depends on the investor’s knowledge of the market; commercial real estate investments are equally lucrative, but they are little more complicated than the residential real estate investment.

1. The residential real estate market is easy to understand

There are two main modes of earning from residential property… rental income and property value appreciation. If you have a good command over the rental market, you can spot the ideal property and location which would give you constant returns. More, you can take the advantage of the overall increase in the property prices in the long run and monetize it at the appropriat moment. For commercial real estate, understanding the quantum of appreciation of property over the time and effect on the future desirability is not easy to grasp.  

2. Residential real estate market shows better stability  

The demand for residential real estate is constant and ever increasing as the population increases. Even if the real estate market slows down, the demand for purchasing property might decrease, but the demand for rental property remains consistent. On the other hand, if the market is on a downward slump, the demand for commercial real estate might become obsolete. Getting loans to purchase a residential property is easier than getting a loan for commercial property too.  

3. Residential real estate properties are easier to lease The demand for commercial property is very tumultuous, compared to the stable demand for residential properties. Also, the lease tenure and types of payment for residential properties are different than that of commercial property. And it takes a lesser amount of time and money to find a tenant for residential property.  

The advantages of investing in commercial real estate The commercial real estate is a little difficult to grasp and it comes at greater risks, it offers great returns nonetheless. The value of the commercial property is high and the rental earning is also higher in case of commercial real estate.

1. Commercial real estate gives better returns

The lease duration for commercial real estate is longer and the quantum of rental income is also high compared to residential real estate. Institutional funds and investors are easily available for long term investment in commercial real estate, which is not so easy for residential project. The location and connectivity play a crucial role in the valuation of commercial property. With a good location, you can easily earn substantial rental income with a consistent demand.  

2. Commercial real estate investors are rare

The residential projects generally attract huge no. of individual investors while only a few individuals opt for an investment in commercial projects. Usually there are enough options for residential real estate, but as per the nature of business and marketing needs, there are fewer options for commercial property for rent. In this case, commercial property owner can earn more ROI.  

3. Real estate requires lesser maintenance

The residential property has to be maintained by the owner and in case you get a bad tenant, the cost of maintenance gets too much, which is not the case with commercial real estate. As the commercial property leases are generally for a long tenure and they are used for activities specific to the business, they are maintained by the tenants with adequate repairs and upkeep.

Investment in real estate cannot be differentiated and judged in general comparison, it varies from case to case basis. Depending on the location, accessibility, economic environment, finance options and investment objectives, the investment decision may give you good returns, whether a residential or a commercial property. But for understanding the dynamics of these factors, you need to consult an expert. Ask Planet Homes if you are looking forward to invest in real estate, we shall guide you to the best investment decision.


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