Commercial vs. Residential Properties in India

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Commercial vs. Residential Properties in India

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In India, the real estate market is mostly composed of buyers and sellers, with both commercial and residential real estate considered as great investment options. – PowerPoint PPT presentation

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Title: Commercial vs. Residential Properties in India


1
Commercial vs. Residential Properties in India
  • BY Thomas Andrew

2
Introduction
  • In India, the real estate market is mostly
    composed of buyers and sellers, with both
    commercial and residential real estate considered
    as great investment options.
  • And both of these have a great impact on the
    total net worth.
  • However, a vast majority of people only prefer
    residential properties for investments rather
    than the commercial.
  • A residential property comprises of apartment
    buildings, flats, individual houses or
    multi-family homes, condos and co-ops.
  • And commercial property comprises of all the
    non-residential buildings like offices, retail
    shops and other industrial units or factories,
    etc.

3
Difference between Residential and Commercial
Properties
  • Residential properties
  • Commercial properties
  • Short Term Leases The commercial property leases
    are usually made for a Short period of time.
  • GST Impact This is not applicable for
    residential properties.
  • Maintenance Costs This cost is not paid by the
    lessee, at least, not as much as for commercial
    properties.
  • Location It is always advisable to invest in a
    property which is in a good area, offering
    excellent transportation.
  • Rental Returns The rental returns for any
    residential property is lower when compared to
    the commercial property.
  • Long Term LeasesThe commercial property leases
    are usually made for a longer period of time.
    Commercial leases are usually made for several
    years.
  • GST Impact The Goods and Services Tax (GST) is
    only applicable for a commercial property, which
    allows an extra 10 on the propertys purchase
    price.
  • Maintenance Costs The maintenance costs, rates
    and repairs on a commercial property are paid by
    the lessee and not the landlord.
  • Location The propertys location plays a vital
    role in the success of any commercial property.
    It is always advisable to invest in a property
    which is in a good business area.
  • Rental Returns The rental returns for any
    commercial property is higher when compared to
    that of a residential property.

4
Benefits of Investing in Commercial Property
  • Longer lease period, starts from 2 or 3 years to
    20 years. Very often, they are secured by bank
    guarantees.
  • The maintenance of a commercial property tenant
    is far better, as the look and condition of the
    property is important for their businesses.
  • The commercial leases have the protection for the
    owners in the form of good clauses maintenance
    clauses and the management clauses.
  • The return on capital for investments in a
    commercial property is around 7 to 10 net of
    all costs.

5
Benefits of Investing in Residential Property
  • The most important aspect of investing in a
    residential property owes to its smaller deposit.
    Based on the income and credit history, one can
    borrow up to 100 of the purchase price. In
    commercial mortgages, a deposit of at least 30
    is required.
  • Rates on mortgages for a residential property are
    lower when compared to that of a commercial
    property.
  • Commercial property lenders are stricter and any
    delays in the property dealings can incur GST
    charges.
  • Commercial property markets are less predictable
    than the residential market.
  • Easy lease agreements in the case of residential
    property. And the vacancy time of the property is
    low, whereas in the case of commercial property
    it takes months or sometimes years to find a new
    tenant.

6
  • In India, one can obtain a commercial property
    which has an existing tenant of several years to
    go in an existing lease agreement.
  • Such a commercial property can bring in a profit
    of about 11 to 13 per annum, whereas in the
    case of residential property investments, the
    profit is just about 3 to 5. Usually the
    residential and commercial real estate cycles
    works differently.
  • So, if there is an existing investment of a
    residential property, then it is better to make
    the next investment in a commercial property,
    which moves according to a different market
    cycle.
  • For example, in the case of Mumbai, the
    residential property prices are in peak whereas
    the commercial property prices are just about
    average.
  • Apart from that, the tax benefit one may incur
    from a residential mortgage is higher, whereas it
    is non-existent in the commercial aspect.

For more
http//www.sivagalerija.com/commercial-residential
-properties-india/
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