We examine how commercial real estate investment differs from residential real estate investment, and why the former shows good growth despite a slowdown in Indian realty.
From time immemorial, people have invested their surplus money in the two most appreciating assets – real estate and gold. But while gold has lower utility, real estate shows tremendous application in daily life. It is also a valuable asset to have in your investments portfolio.
When one mentions the word ‘realty’, it is often residential property that comes to mind. However, another type of realty, i.e. commercial real estate, is also a valuable investment. In some cases, it is a better investment than residential properties, as shown below.
* Residential real estate is a better asset class.
There is higher demand for residential real estate as compared to commercial realty. Housing is a primary need for human beings, while business is a secondary need. A housing unit is sold much faster than a commercial unit, and it has more longevity as well. Hence, if one is looking to make an investment, residential real estate is often a better asset class than commercial real estate.
* But commercial real estate shows better returns.
Having made the point above, it is also pertinent to note that while residential realty may have higher demand and a faster sale rate, commercial realty shows better monetary value. It is certainly more expensive than residential real estate. However, it also fetches more rental income, and it sells at a much higher appreciation as well. Besides, if you own a store space, you own it for life – you can lease it out to different brands and earn a comfortable living from the income.
* Commercial real estate is more flexible.
When you buy a house, it can only be used as a house. You cannot use it as anything but a residential space. For example, you cannot run a shop inside residential premises, nor can you sublet it for commercial purposes. In contrast, commercial realty offers more flexibility. A commercial space can be used as a store, an office, a storage facility, server room, etc. It can also be leased out for a variety of commercial needs.
* You can easily buy commercial property in India.
Just like residential realty, you can buy commercial property in the country provided you have the eligibility for a loan and there is no legal dispute on the property. Use a commercial real estate loan calculator to find your loan eligibility and projected monthly EMI. If you have another property to your name, you can take a mortgage loan to raise funds. Do use a loan against property eligibility calculator to find out how much loan you can get in this case.