Monday, August 13, 2012

Commercial property Vs Residential Property: Key Points of Difference

Properties are of different types. These could be residential, meant for living; commercial, meant for trading purposes; institutional, ideal for setting up institutions; office spaces, suited for doing white collar works and amusement types, meant for recreational and artistic exploits. However, the most common property types to which a common has access is the residential and the commercial properties. But, there are key differences between these two types of spaces. These differences help in guiding you to take the right decision on property.

1.Usage: This is the most obvious distinction between the two and the respective uses of commercial and residential properties have been mentioned before. So, if you are clear on what you want, then an obvious choice can be made.

2.Supply: Always, the commercial properties are less than the residential properties. These are ideal for offices as well as for retail stores. Since the availability of these units is less than residences, the prices are higher. The sizes of these shops are also varied and would depend on what size the government has earmarked for these but the prices of even a small shop will be very high if the market receives good number of customers.

3.Higher rate of return: Commercial properties command a far higher rate of return than the residential properties. If the rate of return is taken to be the rental values of the properties than the residential units will be having lesser returns or rentals than the commercial units.

4.Long term returns: In India, the residential units are given on lease for about a year, if there is a formal agreement and, after that, the agreement is renewed every year. But, the commercial leases are normally given for a much longer duration. These could range anywhere from 5-10 years depending on the tenant.

Another key difference between these two types of properties is that the commercial ones have common spaces which can be used by companies for promotional activities such as road shows and also for holding musical events. This is not possible in case of the residential compounds. So, there is greater market value which is added to the commercial spaces with these types of activities.

These points usually guide a person to select whether to invest in commercial or in residential property. Some of the builders developing residential projects also have the commercial projects being developed alongside or within the residential units. These are also given on sale to the people, either from within the society or from outside. Despite the smaller sizes of these offices, the prices are higher than those of the residential units due to less availability.
These days, besides the traditional market places, there are the modern malls and shopping complexes with centralized air conditioning systems which have commercial spaces for setting up offices or shops. So, the buyer a range of options to choose from.

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