commercial-vs-residential-which-investment-is-right-for-you
15 Oct 2024

Commercial vs. Residential: Which Investment is Right for You?

When you are investing in Real Estate that can be quite a lucrative offer. This provides long term financial stability as well as potential growth. Choosing between commercial and residential real estate can be quite a daunting task for the real estate investors. Both of these have their unique considerations. It is true that both type of investments are a great way that help you grow your money. It will take time to learn both the residential as well as the commercial real estate investments. They are both different from each other. There are some who prefer investing in the commercial real estate while there are others who prefer residential investment.  You can get in touch with one of the best Property management companies who will help you with your investments.

Current Indian Real Estate Market

After agriculture, the commercial and the residential real estate sector is the second highest employment generator. It is predicted that this industry will achieve 1 trillion USD by the year 2030. It will account for as much as 13% of India’s GDP by the year 2025. Some of the major growth drivers include nuclear families, swift urbanisation and business growth.

Average Yields: Commercial VS Residential

As per an estimate the commercial properties offer around 8 to 11% returns which is comparatively higher than the rental yields from the residential properties which is 1.5 to 3.5%. This also applies to capital appreciation because for commercial properties 5-10 % yields is possible while the minimum threshold for the residential properties is 1-3%. 


According to the experts, the difference mainly lies in the lease agreements. The rental yields are mostly 2-3% or at times even less in the residential sector after paying the maintenance charges and the property taxes. On the other hand, for the commercial properties, 7-8% is the net yield from the commercial properties. If you judge from the yield based point of view, the commercial real estate market in India is certainly a better investment proposition.


Why is it better to invest in commercial Real Estate?

The commercial properties have flexible spaces and the hybrid work models have become very popular in the business sectors. The commercial properties will not be limited to Tier I cities. There will be a big chunk of the urban work force that will go to the tier II and the tier III cities as well. This will naturally boost the hub as well as the spoke working model. Most of the employees will want to work in the nearest branches of their employers. The extra plus point in these markets is that they have lower rentals and this encourages more developers to set up secondary hubs in the cities.


Commercial VS Residential- Which one should you choose?

It is true that investing in the commercial real estate might be a little risky, however, this investment assures you of higher yields and comes with low volatility and longer lease durations. The only thing is that you get the best returns in the long term and the initial investment might be quite high.


This is exactly the opposite in the case of the residential properties. The residential properties might initially require a lower amount for the entry level investment. Getting the property financed by the buyers is also much easier. There are hassle free procedures for leasing and the holding period for the returns is also much lower in comparison to the commercial properties. The average yields are lower in comparison to the commercial units and there are also investments required to do the interiors. The added costs are higher and the rental agreements cover smaller tenures and the market volatility is also quite high. You can also contact a residential property management if you decide to invest in a residential property.


The residential real estate will take several years to start giving you attractive returns despite its quick recovery. While you will get tax benefits, it will be difficult for you to earn higher profits because you will have to pay the maintenance charges as well as the property taxes. It is therefore recommended that you should buy properties in this segment only for the end users or for an upgrade. Investors will continue to be more inclined towards investing in the commercial real estate units that offer you higher yields over a longer duration. They ensure a steadier income flow and a much better capital appreciation. You can contact the best property management companies like Grrow Property Management who will help you with your real estate investment.

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