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Commercial vs residential: Where to invest in 2023 for better returns?

Before making a decision, investors must consider all aspects such as budget, connectivity, rent, maintenance, operating costs, tenant availability, and market conditions.

India TV Business Desk Edited By: India TV Business Desk New Delhi Published on: February 06, 2023 12:57 IST
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Image Source : PTI File Photo for representation only

Over the years, investing in real estate has emerged as a new medium of investment. One of the biggest perks of investment in real estate is the potential to generate a secondary income.

Money invested in real estate and acquiring possessions is viewed as the best investment option due to the assured, reliable, and unquestionable profits and better returns. It provides a longer security as well as the advantage of regular income via rental properties since it is a tangible asset. The real estate value invariably escalates over time, and rental rates rise as well, creating more cash flow. The longer you keep your property, the more revenue you'll generate when it comes time to sell, and with a good investment, you can make a lot of money. Investing in real estate has numerous advantages, which include home ownership, tax benefits, rental income, and much more. It is additionally less volatile than stock markets. These elements have piqued people's interest in real estate investments.

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Many investors have a hard time deciding between residential and commercial estate. Although both are renowned investment choices, the rate of return and the amount of initial capital required may differ substantially. Since each of these types of real-estate investments have significant advantages, certain factors must be considered before making any real estate investments, such as tenant availability, site, operational costs, maintainability, rental agreement, and so forth.

According to Nakul Mathur, MD, Avanta India, “Commercial investment continues to outperform residential space in terms of rental return on investment (ROI). Long-term leases and contracts ensure a consistent flow of income for real estate investors. Commercial real estate investment in 2023 will be largely focused throughout offices, co-working spaces, and low-cost retail. Part ownership is a rising trend in commercial real estate today. Rather than acquiring the entire area, the investor invests in a fraction of it and reaps higher return. This trend of partial ownership will continue into 2023.”

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“If the investor has a large investment vision and is searching for a considerable time to the very long-term investing frontier, commercial real estate is the right approach. Conversely, while making investments in a commercial property, aspects such as location, allocation of infrastructural development, and remote access should always be recognised”, said Suren Goyal, Partner, RPS Group.

 

Commercial investment is the ideal choice for...

According to Siddharth Maurya, Fund Management expert - real estate “it is completely reliant on the individual's investment horizon.”

"As a thumb rule, If the investment horizon of the  individual is huge and the person is searching for a long to very long term investment horizon, commercial real estate is the ideal choice.  However, when investing in a commercial asset, factors such as site, availability of physical and social infrastructure, and connectivity must be presumed," said Siddharth Maurya.

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Commercial or residential? Complicated decision

Ankit Goel, Director, Goel Ganga Developments said that “Deciding between the two can be complicated because they each have a distinct set of benefits. The basic laws of supply and demand play a major role in the forecasting process and hence to your decisions today. If you believe in creating and holding assets for Rental Returns, Commercial Properties are ideal. But if the expectation is more certain towards trading and liquidating your asset once it reaches its price potential, residential properties give faster and better results when bought and sold at the right time. The gap in the budget to buy a residential or a commercial unit, is reducing lately, as you may find properties under Rs. 75 lakh nowadays, where in most cities where commercial is available at these prices, there is heavy purchasing and availability of residential units more than this price, so the least worry of an investor should be the budget. The investment market it huge, and investors ought to know these simple rules when trying to make profits in the Real Estate Asset Class.”

Important aspects

Before making a decision, investors must consider all aspects such as budget, connectivity, rent, maintenance, operating costs, tenant availability, and market conditions.

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