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Should one invest in a Commercial or Residential property?

Investing in Real Estate is very rewarding; whether you invest in a Commercial or a Residential property. In general, a real estate investment tends to grow & appreciate, and rarely do you see a value erosion.

Having said that, the key question is, should one invest in a Commercial or a Residential property?

Both have their pros and cons and would largely depend on factors like the Initial Investment Amount that one is willing to pay upfront and the willingness to hold on to the investment for long periods of time. It also depends on the purpose of the investment.

For e.g., a Commercial Real Estate Investment would generally call for a higher investment. After all, the property will be used by a commercial establishment, and they would generally pay a higher rent per sq. ft. compared to a Residential property.

The advantages of investing in a commercial property are several, but the key ones are:

  1. Higher rental rate per sq. ft. Commercial properties are generally rented out at a slightly higher rate making the RoI higher for the owners.
  2. Most commercial organizations tend to stay longer in the same premises. If it is a Retail Shop, then the chances of the retail store staying in the same place is even longer. This brings a lot of stability in the rental income. There won’t be any vacant months because of this.
  3. In most cases, an annual increase is built into the Rental clauses protecting the owners against possible inflation.
  4. Commercial properties are generally low on maintenance costs.

On the other hand, residential properties have their own set of advantages.

  1. The investment levels in a residential property is lower, especially if it is for investment and not for residing immediately.
  2. Residential property may get a lower rate per sq. ft. as rent. But when viewed as a percentage of the investment, residential properties give the investor a good rate of return.
  3. There is a high demand for rental homes as there are so many takers at any given point of time. So, while the tenant turnover might be high, the rental options are always higher.
  4. The Property Tax rates are lower for residential property.
  5. When one intends to sell residential property, finding a buyer might be easier.

So there are always pros and cons with both Commercial & Residential Property Investments. Rental income and price appreciation depends on many factors like current market trends, location, social and physical infrastructure. These are deciding factors for both commercial and residential property to appreciate.

One of the good investment options, be it residential or commercial is SPR City, Chennai. SPR City is the largest Integrated Township in Chennai, with India’s largest wholesale & retail market – Market of India offering shops & office spaces, residential apartments, and bespoke bungalows. SPR City offers options for both Commercial as well as residential property investment.

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