Commercial vs Residential Property: Compared - What a real estate investor should choose for investment purpose

Commercial vs Residential Property: Real Estate market is expecting push post-Lok Sabha Elections 2019 as the sops — reduction in GST, reduction in RBI Repo Rate etc. — announced by the central government ahead of the general elections 2019 notification would start showing its effect on the sector. In fact, the private equity and venture capital funding agencies have got a clue about the government intentions in regard to the real estate sector hence the question has become ripe into the Indian real estate sector as to which segment is a better investment option: commercial real estate or residential real estate? The industry insiders say that Real Estate Investment Trusts (REITs) are enough to indicate that commercial real estate is poised to give a better return for both individual and retail investor while the residential real estate will remain a hot destination for the individual investors.

Commercial vs Residential Property: What's the key difference?

Elaborating upon the difference in return Dhiraj Jain, Director at Mahagun Group said, "Capital appreciation alone was a sufficiently dynamic prospect for most real estate investors. Office space assets have emerged winner as there is a constant demand for these spaces and with REITs the demand has seen a new high. So, as of now, the office properties are yielding returns to investors. A lot IT/ITeS companies are going for rationalization of manpower and they are also likely to optimize their office real estate portfolios. These firms would consolidate offices across various locations and move to smaller cities. This is opening up new avenues for investment in the commercial segment."

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Commercial vs Residential Rroperty: Return on investment?

Harinder Singh, Chairman, Realistic Realtors said, "Earlier, return on investment in the residential sector was good depending on the choice of location and builder's brand. The ROI was more because of the capital appreciation which was far better than the low rental yield. However, in the last few years, the scenario has changed as capital and rental yields are not that great the way it used to be. A stagnant scenario has emerged in this segment and this led the investors to look at the commercial segment. The shift in focus of NRIs and HNIs towards commercial real estate has also led to this upsurge in interest. Last year witnessed a jump of 21 per cent in new commercial supply as compared to 2017."