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Investment in Residential vs commercial

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Investment in Residential vs commercial

Last updated: August 13 2014
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  • Investment in Residential vs commercial

    I am looking for some investment, however really confused if I should go for residential vs commercial. I am comparing around 30 lakhs investment in residential 2 BHK flat vs small commercial (gala). Really don’t know anything about the commercial properties, what kind of taxes and other dues are associated with them. My guess is that commercial property may give more return vs residential property.

    Any suggestions or comments appreciated.

    Guys pls suggest
    Last edited December 20 2010, 04:51 PM. Reason: update
  • #2

    #2

    Re : Investment in Residential vs commercial

    Comment pls

    Comment

    • #3

      #3

      Re : Investment in Residential vs commercial

      Any Help

      I also have the same questions but I wonder why there is no replay to this post. Why everyone just speaks about Residential property here when it comes to real estate investment? Is there any downside of investing in commercial property over residential property.

      Appreciate if forum members put their views, especially seniors.

      Thanks
      Prajju

      Comment

      • #4

        #4

        Re : Investment in Residential vs commercial

        For past one year, I was looking for investment in commercial, mostly a shop in hometown or another small town where my relatives are, not in pune. I learnt, appreciation in commercial property will be purely based on return on investment in the business while appreciation in residential is based on sentiments and job-market.
        To evaluate market price of a flat is easy, check all nearby places at what prices the flats are being sold, but for commercial, the price of shop would be based on how much business it fetches there (also differs a lot in front and back side, etc) This evaluation you can only do if you know the business there.

        Originally posted by enjoy View Post
        I am looking for some investment, however really confused if I should go for residential vs commercial. I am comparing around 30 lakhs investment in residential 2 BHK flat vs small commercial (gala). Really don’t know anything about the commercial properties, what kind of taxes and other dues are associated with them. My guess is that commercial property may give more return vs residential property.

        Any suggestions or comments appreciated.

        Guys pls suggest

        Comment

        • #5

          #5

          Re : Investment in Residential vs commercial

          The idea that a commercial property is always more profitable than a residential property is flawed. Most just beliefs are only established due to hear-say from family and friends.

          Commercial property (typically shops) give great returns in terms of rents only when the area in which they exists becomes prime. For e.g. a shop along a very busy main road with a lot of residential locality will warrant a lot of rent. However, in an isolated area, where all the buildings are under-construction it is unlikely to fetch enough rent, till that area transforms into a really bustling locality.

          I live in Kharadi and can vouch for it for sure. The typical commercial rate for a shop here is around 7000/sqft. When inquired with some kiranawalas I learnt that they pay a rent of Rs. 5000.

          Lets calculate the returns for such an investment.

          If you were to buy you would pay - 400 sqft * 7000 /sqft = 2800000
          Forget about added costs like stamp duty, other charges, builder's fancy charges, etc.

          The price to rent ratio is 560, which is really skewed, at least in Kharadi.

          I don't know much of commercial offices and hence won't comment on the same.

          Comment

          • #6

            #6

            Re : Investment in Residential vs commercial

            In Pimpale Saudagar, some people have taken shops at very low rates. Their 7-8 lacs shop is fetching rent 30 to 40 K. Now the rate is around 12 to 16 K per Sq. foot.

            If the shop is located in area with crowd of high spending people then you can surely get higher rent.

            Comment

            • #7

              #7

              Re : Investment in Residential vs commercial

              Investing in a Residential Project

              Hi,

              I think the choice depends on the location and the prospective growth possible. But as for me, investing in a residential property is a wiser decision since the investment is less risky and yields better results.

              Comment

              • #8

                #8

                Re : Investment in Residential vs commercial

                I've heard, in commercial property deal, builders mostly demands cash… so be prepared for that as well....

                Comment

                • #9

                  #9

                  Re : Investment in Residential vs commercial

                  There many points to look at for commercial areas.

                  Eg. A shop of 400 sq ft may not work at a place where everything is there, but if there is absence of bank, a space of 3000 sq ft will work where 400 sq ft failed in the same area,

                  Again, commercial areas also includes office spaces, where the offices are leased to cos. The calculation here is far different than those for shops.
                  Eg. in areas of ICC, SB Marg, offices will work better than shops. Just see how Indiabulls & later Pyramid mall failed despite being close to ICC.

                  Then there is also option of restaurants, eateries etc. which can be explored. Bank ATMs will work even if the area has 100 kirana stores!!

                  All in all, buying commercial property requires more complex calculations as it not only considers the location & rental alone but even the type of usage.
                  If you are happy, you are successful.

                  Comment

                  • #10

                    #10

                    Re : Investment in Residential vs commercial

                    Where are you getting figures for the entire world of residential real estate?

                    In USA, if today you buy a SFH (Single Family Home) or a bunglow in Indian terms, it will cost you approx 150k. This is in middle class neighborhoods. Your rent will be approx 1500k per month.
                    This gives 12% return on US residential real estate today.

                    Now coming to India, you can buy a 2 BHK for 1 crore in Samrajya, Kothrud, for which you will get a rent of 15k per month.
                    This gives 1.8% return on Indian residential real estate today.

                    Comment

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