Most of the investors struggle to choose between Residential and Commercial Real Estate. It is true that both of these are popular investment choices, however, the initial capital and the rate of returns significantly vary. These have varied potentials for earning for the investors. You can invest in the best commercial property in Gurgaon by getting in touch with Grrow Property Management which is one of the best real estate companies in Gurgaon.
Commercial Real Estate has showed a lot of resilience even in the middle of pandemic. There is a very high demand for the office spaces as well as the data centres that are recovering with also a boom in the co working space market. There was a blow to the residential real estate and it was completely in a limbo for 2 years during the pandemic. Things have however, changed now and there are several benefits for the residential buyers as well.
Average Yields- Commercial VS Residential
According to a recent estimate, the commercial properties offer you a return of 8-11 percent which is higher in comparison to the present rental yields from the residential properties which ranges between 1.5 to 3.5 percent. The capital appreciation ranges between 5 to 10 percent for commercial properties and between 1 to 3 percent for the residential properties.
As per the experts, the difference primarily lies in the lease agreements according to the experts. The rental yields are between 2-3 percent and at times even lesser for the residential properties after paying the maintenance and the property taxes. On the other hand, the rental yields for the commercial properties range between 7 to 8 percent. If you consider it from the standpoint of yields, the commercial real estate market certainly makes a better investment option.
Recovery of the Residential Real Estate Market
The Residential Real Estate market has been lull for several years but now it seems the residential sector is shaking off its gloom and is getting into the recovery mode very quickly. The Real Estate stocks have also started gaining momentum and there is expectedly a positive long term returns for this industry. The sentiments and the demands for the properties have come back strongly and there are new launches and new projects selling very fast.
The government is also supporting the Real estate sector to a great extent. The government is trying to lower or stabilize the prices of the properties and lowering the interest rates. Even the property developers are coming up with several attractive offers and the RERA has also worked very well with the turnaround time. These days the customers prefer the reputed developers more.
What should you choose- Commercial or Residential Investment?
It is true that the investments in the commercial real estate is less risky and provide you higher yields. These, however, come with much longer lease duration as well as lower volatility. The thing for commercial real estate is that returns are best expected over a long period of time but the investment during the entry level might be higher.
The Residential properties might require a lesser entry level investment, however, getting loans against these properties are much easier and hassle free. The holding period is also lower in comparison to the commercial properties. The average yields are lower in comparison to the commercial properties, the extra costs are higher, the tenures of the rental agreements are shorter and the market volatility is also much higher.
Conclusion
It will still take time for the residential real estate market to give attractive yields as that of the commercial properties. It is true that if you invest in the residential properties, you do get tax benefits but earning higher profits from it will be difficult after paying the property tax and the maintenance charges. If you are planning to invest in the real estate sector, it is highly recommended that you buy properties in this sector only for end use or if you are interested in upgrade. The investors will focus more towards the commercial Real Estate units as these offer higher yields over a long duration. These also ensure that the income flow is steadier and the capital appreciation is also better. If you are still planning to invest in residential real estate, make sure that you invest in the best residential projects in Gurgaon.