The decision of investing in commercial or residential properties in Mumbai has never been easy for any investor due to the fast-changing dynamics of the real estate market. Real estate has been proved to beams/or way of creating a strong passive income stream with a lot of possibilities of wealth creation in the long term. With the implementation of RERA, demonetization, GST, and tao benefits on home loans over the past few years, the prices of real estate have significantly affected across all cities in India including Mumbai.
However, many people are not aware of the big difference between commercial and residential property and they end up focusing on one type not knowing that, the leasing business in each type has a different dynamic. This has affected the investment of real estate in Mumbai. Nevertheless, the big question is, do you go for the residential or commercial property investment? Let's look at the residential vs commercial investments in Mumbai from various perspectives
1. Commercial property investment Capital appreciation is one of the prospect dynamics for most investors and with the Real Estate Investment Trusts, the demand for office spaces has gone high in Mumbai. Commercial spaces are yielding high returns and some IT companies are considering rationalizing manpower and optimizing their real estate portfolios. This is likely going to be opening up new revenues for investment in commercial segments.
Advantages of investing in commercial properties (1). Longer lease term While a residential lease runs for about 12 months, commercial leases go for at least 3 years. Longer leases have the following benefits - Lower vacancy rates - Assurance of reliable cash flows - Lower turnover costs
(2). Easy to increase the value of the property A commercial real estate is valued on a precise approach such as the amount of revenue it generates, This has a great impact value on the resale price. High yields are also expected.
(3). Legal safeguards The paperwork and legal aspects are well taken care of
2. Residential property in Mumbai With the city hosting about 20.7 Million people, it's surely an ideal decision to invest in residential real estate. Mumbai has also been recorded to fetch the highest rentals from residential establishments across the country Below are some of the advantages of investing in residential property in Mumbai
(1). Steady rental income These properties tend to perform consistently even during economic downturns. It doesn't matter what the condition of the economy is like, people will still need a place to live. If the economy hits bad a businessperson, that won't affect his paying rent. Property owners don't suffer as much as retail people.
(2). Lower barriers to entry It's easier to understand the concept behind investing in residential property. I mean at one time, most people had been either a landlord or a tenant. Additionally, this type of investment requires less capital and low risk is involved.
(3). Other advantages include; - Less legal matters are involved - Tax benefits - Stable demand/ larger buyer pool
Conclusion There are very many factors that are to be considered when making this crucial decision such as investing in residential if you're a first-time investor. However, your choice majorly depends on your budget, objectives, and expectations from the investment.
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