Which Investment Will Fetch You Greater Returns?

On many occasions, the property buyer is confused about whether he should invest in residential or commercial property. Or, in other words, which one of the two would generate greater rental income.

Let us look at some of the important points that must be considered before investing in residential or commercial property.

Tax Benefits: Income generated by let outresidential and commercial property is taxable. However, house property purchased on loan is eligible for tax breaks under Section 24 and Section 80C of the Income-Tax Act,1961.

Risk and Unpredictability: This is regarded by many as higher in residential property. After all, the residential property is subjected to the frequent change of tenants, greater maintenance cost, and lower return. Commercial property, on the other hand, offers consistent and long-term rentals with a predictable source of income.

Getting in and out of an Investment: Though both commercial and residential properties are illiquid assets with Real Estate Investment Trust (REIT) regulations, it will be easier to create a portfolio of commercial properties than residential properties. Moreover, as the supply of Grade A pre-leased assets is low, its demand is greater which makes it more liquid than residential properties.

Conclusion

Before one invests, the individual must understand that any investment in commercial property, which might include office, retail, warehouse, etc., require the potential buyer to take into account aspects like the existing ecosystem in the region, current leasing environment, distance from complementary and auxiliary industries, clearances that are specific to the property’s usage, legal due diligence, etc. Residential property, on the other hand, requires to be analyzed for liveability criteria like social infrastructure, the neighbourhood, profile of other residents etc.

While investment is an entirely personal decision and is based on the need and choice of the investor, it must be understood that if one takes into account the points mentioned above before taking the plunge then there are more chances that the decision would earn better returns.