Can Residential Property Be Put To Commercial Use?

Mumbai-based Deepika Khurana, a 27-year-old doctor, wanted to convert a room of her rented apartment into a clinic. However, her landlord told her if she did so, he would be forced to increase the monthly rental, as he would be liable to pay commercial property tax on his residential property. When Khurana consulted a lawyer over conversion of residential property to commercial property, she was informed that her landlord was right.

What does the law say?

If the zoning rules and the housing society management rules allow it, you can use or rent your residential property for commercial activity. However, states have different sets of rules on conversion of residential property to commercial property. Some states allow up to 30 per cent area of a house to be put to commercial use by professionals such as doctors, lawyers and chartered accountants, but others do not.

In case your state allows this, it is necessary to get an approval from the housing society before conversion of residential property to commercial property. Depending on the nature of the business, it may also be necessary to obtain permission from the local municipal authority for the conversion of a flat into a commercial establishment. Once a property is marked as commercial property, it would be treated as a commercial property for all purposes, which includes paying more as property tax.

There are three things that you have to keep in mind before converting a part of your house into an office:

• Get a shop and establishment licence from the municipal authority concerned. 

• Before you apply, be clear on the area you would need and the kind of business you plan to carry out. 

• The civic body would levy commercial charges on the property and water and power supply, depending upon the area, the property size and the nature of business activity.

It is to be noted that there are certain professions that have been exempted from this. Typically, if you are running a teaching, painting, yoga, dance or tuition classes from your premises, you would not be liable to pay commercial charges.