Property used for farming, commercial property – used for commercial activities such as running a business, and residential property which, needless to say, is used for residential purposes. Farmlands are not accepted as mortgage as per RBI regulations, hence we will discuss the only commercial property and residential property.
To understand the difference better, let us take a look at the points comparison between a residential property and a commercial property.
1. Quantum of investment: Commercial properties, for instance, Puranik Grand Central, due to the conditions put forward by the regulatory authority, are costlier than residential property.
This is mainly because the tenants of commercial property are business and not families. So, the quantum of investment in terms of residential property is smaller compared to commercial property.
2. Lease period: Commercial property, since it used for a business and the address, location, etc. is shared on different business listing websites and registrar office, have to be leased for a longer period of time compared to residential properties which are leased for a maximum of 11 months after which they are renewed.
3. Leasing and vacancy risk: The tenants of commercial properties are mainly businesses which would continue to occupy the property as long as the business is running properly.
However, if the business doesn’t work out, the tenant may opt out of the lease and the owner of the property will face a loss if he/she fails to find another tenant quickly.
Additional Read – Best Time to Start Investing In Real Estate