‘Golden Rule’ of earning from rent, know how commercial property is giving 3 times more than residential

Real Estate Investment: Nowadays people like to invest for their future. Many people invest in real estate, but it is not a small decision. Because it costs lakhs and crores of rupees. That’s why people always wonder whether to buy residential or commercial property? If we talk about residential property, it is stable, whereas in commercial property, the income is higher but the risk is also higher.

What is the difference between income from residential and commercial properties?

According to Harshal Dilwali, Director and CEO of Clarissa Group, the biggest difference between these two is in the method of earning. Generally, a flat of Rs 50 lakh can get a monthly rent of Rs 15-20 thousand from a residential property. If we talk about commercial property like a shop or office, you can earn 2-3 times more, but both investment and risk are higher.

How much return do you get?

• If we talk about their returns, the returns in commercial property are around 6 percent to 10 percent.
• Whereas residential property gives returns of around 2 percent to 4 percent.

This means that it is clear that the earning in commercial is high, but choosing the right location and good property is very important.

How stable is the income?

• Tenants are found quickly and easily in residential properties, hence the income remains stable.
• Commercial property is dependent on business, so in recession the shop or office may remain vacant.

Know what the risks are?

• If we talk about old property, its maintenance cost may be high.
• There may be a delay in getting new projects and also there is a risk of problems in approvals or less than promised returns.

Keep in mind that before investing, thorough investigation of the developer and the project is necessary.

Important advice for those with low budget

Instead of just chasing prime location in low budget like…

• Invest in tier-2 cities or emerging areas.
• Property here is cheaper and there is more potential for growth in the future.

After all, what should one invest in?

Commercial property- High returns, but high risk
Residential property- Lower returns, but more stable and safe

For a first-time investor, the decision ultimately depends on his budget, risk appetite and how actively he wants to manage his investments.