Real Estate Investment: Residential Vs Commercial – which will fetch you more rent?

With land becoming increasingly scarce, the prices of real estate properties – especially residential and commercial plots – are also on the rise. Traditionally, people prefer to invest in real estate as selling properties after holding for a long time generally increases their prices substantially.

“Real estate has consistently been a dependable investment with little risk and high profits. The sector is still favored above others despite the market volatility and turmoil caused by COVID and bank interest rate hikes,” said Sachin Aggarwal, Sales Director, Saya Homes.

While a self-occupied home provides the owner relief from paying rent by moving from a rented house to his/her own home, to generate income from a property, the owner needs to put it on rent to get rental income.

“For those looking to invest in the real estate market, rental income is a crucial factor. Both commercial and residential real estate offer appealing rental income, but there are some distinctions between the two. Commercial property is ideal if an investor is looking for long-term investments and has a wide investment horizon because it continues to offer a consistent rental ROI potential. On the other hand, many people consider purchasing or leasing residential homes in order to produce rental income at a lower rate,” said Aggarwal.

However, to earn rental income, an investor needs to invest first. Moreover, the amount of rental income depends mostly on size and location of a property along with it’s architecture and as well as on amenities provided.

So, to get more rent, one needs to invest more. Avenues like fractional investment in real estate, however, now provides even not-so-wealthy persons to invest in high-end residential and commercial properties.

“Amongst tenants, there has been a growing interest in the luxury segment as they prefer luxury houses that offer the security and safety of a gated community, as well as more open green spaces and other facilities that promise a better quality of life. For homebuyers, a luxury project is a worthwhile investment since it increases in value over time and gives the investor a strong rental possibility. After that, they can rent out their properties and make more money, as long-term leases and contracts guarantee a steady stream of revenue for property owners and real estate investors,” said Aggarwal.

Growing interest from wealthy and NRI investors is also making real estate investments more lucrative.

“In recent times, the resurgence of UHNIs, HNIs, and NRIs has helped luxury and ultra-luxury developments gain more traction, whereas the growing preference of real estate investors’ for residential properties in Tier II and Tier III cities has been a strong investment trend in the post-pandemic environment. Rental revenue is also influenced by a variety of other variables, including location, social and physical infrastructure, and market trends. This can have an impact on both commercial and residential property,” said Aggarwal.

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