Few facts regarding residential and commercial properties
Commercial Real Estate is one of the three primary types of real estates. The others are Residential Real Estate and Industrial Real Estate. In India Commercial Real Estate is not as dynamic as Residential Real Estate. For those who are interested in exploring this segment there are a few facts.
- A residential property investment is more like a “need” in the Indian context whereas a commercial investment is invariably a “want”.
- Most individuals prefer to begin their property investment with residential after which they think of second residential investment or an investment in commercial property.
- Before investing in commercial real estate market the investor has to have a proper idea about the kind of commercial property he would like to own (office space, shop, godown, retail etc) its usage, and the money he is ready to shell out.
- Buying a Commercial property is high on both, risk & reward as macro factors impact commercial valuation more than residential.
- Commercial investments are generally more expensive but they yield better ROI (in the rage of 6-10% p.a).
- There is less competition in commercial real estate but both the buying & selling is slightly more technical in nature when compared with Residential.
- In the case of leasing, commercial properties are leased out for a longer tenure (typically 6-12 years) compared to residential (typically 1-3 years), hence there is a better tenant stability compared to residential property. However, it is sometime difficult to find tenants for commercial at the time of 1st leasing and after the existing lease expires.