As a beginner in the paradigm of real estate, one of the most skeptical phases is to make up an idea of where to invest in order to gain maximum return. The bewildering phase to invest whether in the commercial property or residential property not just confine itself here, but the pros & cons of the rental income from both of the properties are the major areas of research. Because the realtors cannot afford to miss the significant consideration of rental income. Commercial properties as well residential properties require some of the basic fulfillment of need which is, to be in the proximity of auxiliary and complementary industries, location of the property, quality of construction, age of the property and usage which automatically accentuates the rental flow.
The quintessential element for both properties demands a potential purchaser who must hold a sound knowledge of lease policy spectrum. As a beginner, the residential practices is a cake walk for investors which also comes up with plenty of tax benefits landing all the beginner realtors investing in residential property spaces whereas complex commercial property fetches more income whirl wildly. The onus of the residential property maintenance falls directly upon the landlord while the tenants are majorly responsible in commercial spaces for the wear and tear.
The concept of the rental housing sector evolved in India because of the acute shortage in the housing sector. The rental expenses of housing are generally low as the middle-class tenants only require basic yet functional infrastructure with a congenial environment in modern urban cities. On the other hand, commercial property is always costlier. Compared to the residential spaces, commercial rental accentuates and has a longer lease period. Keeping aside its legal cases, commercial spaces have comparatively higher rental yields which are undoubtedly notable for any real estate realtor looking for significant passive income. Consequently, for a medium to long-run investment planning, commercial property investment for optimum return in the form of rental income is preferred by the realtors.
Risk & Benefit Factors Prevailing in Commercial & Residential Properties
Threat & Uncertainty – It is comparatively higher in residential property because of the frequent and varied tenants and unprecedented wear and tears leading to excessive maintenance charges with a lower return. Commercial property offers predictable and long term rental income.
Entry and Exit of investment – With Real Estate Investment Trust (REIT) it is quite easy to create a portfolio of both properties.
Tax benefits – Under Section 24 and Section 80 C of the Income Tax Act, Residential Properties abstain itself from the tax break if the property is taken from the home loan.
As Eldeco MD Pankaj Bajaj says, “In the conventional era of skepticism for beginners in the real estate spectrum, passive income generated by commercial properties high rental yield is a concrete step for the establishment”