A 5-Point Comparison Between Commercial Property And Residential Property

Last updated on February 18, 2019

The basic difference between a residential and commercial property is that you can self-occupy a residential property or rent it out to individuals or families. On the other hand, you can use commercial property for investment purposes and can rent it out to businesses only. However, apart from the end utilisation, a residential and commercial property is different from each other in many ways.

Take a look at the 5-point comparison between a residential property and a commercial property to understand both better.

Quantum of investment

Without any doubt, commercial properties are costlier than residential properties. This is mainly because the tenants of a commercial property are businesses and not families. Assume that you decide to buy a flat in Mumbai. You will certainly pick a property based on the location, budget, and other needs to keep costs low. On the other hand, for a commercial property in Mumbai, irrespective of the location you choose, you will have to shell out a higher amount, primarily because the space involved and potential return on investment is higher. 

Lease period

While commercial property leases can run up to 10 years, residential property leases last only up to 11 months. Thus, by renting out a commercial property, you can be sure of earning regular rental income for a longer duration without having to search for new tenants ever so often. On the other hand, if you own a residential property and your tenant doesn’t want to renew the lease due to higher rent, you will have to look for new tenants year on year. Moreover, in this case, the longer it takes to find new tenants, the lower your rental income for the year will be.

Leasing and vacancy risk

The tenants of commercial properties are businesses. If they run into losses, they may not complete the lease tenor and may opt out mid-way. If this happens, it may take some time to search for tenants as unlike residential properties, the audience looking for commercial properties is smaller. On the contrary, it is easier for you to find tenants for residential properties as many families are on the lookout for affordable homes all year round.

Rental income

As a rule, commercial properties yield higher rental income than residential properties. According to experts, depending on the location and quality of the commercial property, your investment can yield around 6%-10% rental income. On the contrary, the rental income for residential properties is much lower. 

Sale of the property

Since commercial properties involve a high amount of investment, they are costlier than residential properties. Thus, demand for investment in these properties is restricted to high net worth individuals. On the other hand, if you decide to sell your residential property, you are likely to find many more buyers who are interested. So, if you buy a residential property in an ideal location, resale is sure to be much smoother.

To sum up, commercial properties are good as an investment only when you have the potential to draw in a heavy income from it over time. On the other hand, in the case of residential properties, you can stay in the home, rent it out or sell it. It works in multiple ways to safeguard your interests. So, invest in a residential property first and only then consider investing in a commercial property. Look for properties such as the Puranik Grand Central in Thane, Mumbai, that offer grand and comfortable 1BHK and 2BHK properties surrounded by a breath-taking landscape.

Start searching for the right home without any delay and make your investment convenient and economical by availing a home loan by Bajaj Housing Finance Limited. It not only funds your purchase, but also offers other beneficial services. When you avail a loan from Bajaj Housing Finance Limited, you can access an amount of up to Rs.3.5 crore at affordable interest rates. This way, you don’t have to worry about exceeding your budget and can concentrate on buying a property that suits your needs. Along with affordable funding, Bajaj Housing Finance Limited also offers other services like in-person search assistance to find the right home, property dossier to help you understand the legal aspects of buying a home, and documentation assistance to hasten the approval process. So check your pre-approved offer from Bajaj Housing Finance Limited now.