WHICH IS MORE ATTRACTIVE: RENTAL INCOME FROM RESIDENTIAL OR COMMERCIAL PROPERTY?

The amount of rental income generated is the main consideration point when a person decides to invest in a property. The location, construction quality, age and usage of the building are scrutinized for both residential and commercial property to ascertain its rental yield. There are both pros and cons for each type of property and the final decision rests with the buyer and the level of risk that he/she is willing to take.

Commercial property:

Any real estate property that is approved, designed and built for business activities such as retail or wholesale trade, manufacturing, hotel, offices, restaurants, warehouses etc are called commercial property.

This is a capital intensive investment and often yields higher rental returns. The rentals for a commercial property is highly subject to market prices. The leases are often long term also after a tenant vacates, it might remain vacant for a longer period of time as well. There might be specifications related to a particular kind of commercial property and often this needs to be met to ensure income.

Residential property:

Any real estate property that is used for residential purposes is termed as residential property.

These can be used by single family or multiple families, however, a business of any kind is not permitted. Rental residential spaces in India developed due to the acute shortage of affordable housing.

It is not capital intensive as most residential tenants require only the basic facilities and infrastructure. The lease or rental is also for a short term, often a year. This means that the tenants keep changing frequently. The rental value for residential units is not dependent on market prices and so remain stable.

Commercial property gives a higher return in investment when compared to residential properties but, it is also complex and can overwhelm newcomers in the field. Residential properties are simple to understand and provides a definite income over a time period. It is also not highly dependent on the market price or the current trends as far as interior specification is concerned. Residential units are, therefore, preferable as an investment option. If the property is by a reputed builder and comes with a cluster of amenities on the premises, the rental value of the property increases. It is also easy to arrange finance from top banks at reasonable interest rate especially if the paperwork maintained by the builder is up to date.

An example can be completed and upcoming projects of Vajram properties in Bangalore. There are a host of amenities and the location is in upcoming hubs of Thanisandra and Yelahanka. The proximity to reputed schools and office spaces ensures that there is a steady demand. Clear titles and proper paperwork as well as compliance to Green building standards ensures that the property is receives easy funding and there is a definite return on investment.

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