Commercial vs. residential real estate: which is better for investment?

Those who’re unfamiliar with real estate investing may struggle with it. What kind of real estate should you invest in? Which region of the nation is doing the best? Are commercial real estate investments more profitable than residential ones? To be able to decide where to invest their hard-earned money, investors need the answers to these questions. 

What are residential real estate and commercial real estate? 

Commercial real estate is a catch-all phrase for significant market segments like retail, office, and industrial properties. Many different types and sizes of properties are apartments, daycare centers, condominiums, movie theaters, parking lots, factory floors, warehouses, and retail locations used by businesses like Big Bazaar, Croma, and others. 

Any property suitable for business is commercial real estate (CRE). There are now also multi-use areas that can serve as residential or commercial spaces. 

Real estate for residential use includes housing typically rented out rather than owned. Although it may sound overly simplistic, the truth is that it is the same. Residential real estate (RRE) is any property designed solely for habitation. They can also be part of multi-use spaces, as explained earlier. 

The primary difference between RRE and CRE is in how they are rented or leased, with the related legalities. Because of those differences, investing in either has a very different aspect, even though the basic principle is the same. 

How residential and commercial real estate differ from one another. 

Does investing in commercial real estate make more sense than in residential real estate? It is necessary to consider both possibilities even though the answer to this question doesn’t have to be yes or no. When you’re open about your objectives, the amount of cash you need versus the level of investment income you want, and the time frame for realizing profits.

The general rule is that an asset like real estate only produces good returns when held for a while, like two years or more. That also applies to CRE and RRE. RRE may seem easier to get into as an investor, or, more specifically, as a retail investor, than CRE, and the former offers more options for tailoring your portfolio. Let’s examine the differences between both and determine which investment option would be more appropriate for you. Learn more about what each investment option offers. 

You have two options when considering investing: commercial or residential real estate. Most people will stand firmly behind one cause and fight for it. The two may have merit depending on your financial situation and your goals. You can invest your money in both, certainly, but when it comes to maintenance, time spent interacting with tenants, and other things, renting a residential property is much more work than owning a commercial one. 

The effectiveness of investing in commercial and residential real estate depends on the goals and risks involved, as with all investment options. 

Regarding CRE

  • In contrast, it is still more difficult for an individual investor to enter the CRE market. 
  • In most cases, the initial investment is quite substantial for a retail investor, and to accurately evaluate the advantages of this investment, one needs to have a solid grasp of market supply and demand. 
  • Here, however, a property investment firm can come in handy. You only need to decide whether an investment option is best for you; they can handle all the complicated legal work. 
  • It is now easy for a retail investor to enter the CRE investing space due to the inclusion of REITs and fractional ownership in the real estate investment scenario. 

Regarding RRE 

  • Investors must purchase the asset outright and take possession of it. Family members may join the partnership as co-investors, but that is usually where the relationship ends. 
  • When looking into residential real estate, you can =need to connect with experienced investors. People typically construct their homes and rent them out. In most cases, people mostly build their properties and rent them out. 
  • In this manner, the investor only receives the title to the property for a minimum of five years. Since no purchase is required, the investor can simply move on to the other asset at the end of the lease period if the investment does not turn out well.
  • Either way, the uncertain nature of the tenants and the extremely short periods of rental agreements make investing in RRE less lucrative. Due to the small number of tenants and the short length of the rental contracts, it is easier to get started. 

Both options offer hassle-free investment processes geared toward long-term investments while reducing the initial investment’s value. 

Which one to choose 

The risk involved and the goals in mind are the two main factors that the investor will consider when investing, as was previously mentioned. Real estate investing also carries the risk of losing money. The returns would still be sufficient to cover the investment if a property lacked enough tenants during the investment period. 

  • From this standpoint, commercial real estate is less risky because it almost always has a consistent cash flow because of the rock-solid lease terms for tenants. Purchasing a residential property, in contrast, can be quite risky due to the unstable cash flow and potential for significant changes in market demand.
  • The real estate sector’s impact on residential real estate during the outbreak and spread of the pandemic was the greatest. Additionally, residential property tenants will be the first to be affected by a decline in economic activity in any area because, even without a firm, long-term lease agreement, they would always want to minimize their losses. 
  • If you have enough experience and contacts in the area, invest in RRE. CRE needs to have long-term objectives that span at least five years. As a result, the returns produced make more sense, and you have more time to consider other investment opportunities thanks to passive income. 


The benefit of commercial real estate is that tenants are almost always available because rents tend to be more stable, and lease terms are frequently more specific and long-standing. Commercial properties typically generate higher gross returns with less effort. Residential properties offer better returns and don’t require significant capital investment in many regions because tenants pay no mortgage or interest. 

The bottom line is that before deciding to invest in commercial real estate or residential real estate, it pays to do your research. 

Real Estate Voted the Most Preferred India Investment

real estate investment

real estate: Best option of investment in India.

Despite the price hike of Gold and silver, real estate claimed the top spot among the preferred choices for investment in India. Respectively both gold and silver reached the second and third spot. According to survey of PHDCCI which was conducted among the investors, Real estate was voted as the most preferred choice of investment. Continue reading

NRIs want to buy home in India

NRIs are investing into residential real estate specifically in large Indian cities to build a back-up base in the country as many of them intend to set up businesses in these cities in the future. I think there is  not a single non-resident Indian (NRI) who is not keen to buy real estate in India. Having a own home in this country is one of the means available to them to stay connected to their motherland. As they make their fortunes abroad, such investments in their country help them to maintain their relationships back home.

What I found most interesting was that they had not even considered eventually relocating to India when they bought property here as they have simply done it for investment.

NRIs are investing into residential real estate specifically in large Indian cities to build a back-up base in the country. This particularly applies to NRIs with professional/entrepreneurial ambitions who intend to set up businesses in these cities in the future.

As during 2008-2009 global financial crises (GFC), India has presented itself as an example of financial stability. This GFC has caused NRIs to seriously think about buying homes in India.

As per the limits regarding how many commercial or residential properties they can own in India, there is no restriction to the NRIs. But when a NRI wants to sell and take the money back, he can do so with the sale proceeds of only two units. NRIs can invest into real estate by transferring funds to India through normal banking channels, or by invest through funds in a Non-resident external (NRE)/ Foreign currency non resident (FCNR)/ Non- resident ordinary rupee (NRO) accounts maintained in India. But payment via travellers’ cheque or foreign currency notes is not permitted.

Home loan can be availed from Indian institution approved by the National Housing Bank (NHB), and loan repayment can be done either through inward remittances, debit to a NRE/FCNR/NRO account, through the rental income which is earned in India. NRIs can also apply for home loans from the employer in India, provided specific terms and conditions listed by RBI are met.

NRIs are allowed to mortgage their residential property in India with an Indian financial institution without any approval from RBI. They can also mortgage it with a foreign financial institution with prior approval from RBI.Also they can rent out their residential property without the approval of the RBI in India and the rent received can be credited to NRO/NRE account.

Tata Group went into partnership with Mizuho Securities of Japan

The Tata Group Company plans to raise $500 million for an India-focused private equity (PE) fund through its partnership with Mizuho Securities of Japan. Tata Capital announced last month that it will raise 1 billion Dollars from both the foreign and domestic investors by the end of next year.
On the other hand, Mizuho Sec plans to focus on developing a growth capital private equity business in India. Also, it wants to invest in Indian companies through private transactions. According to MD & CEO, Tata Capital, Praveen Kadle, Japan’s saving base offers a stable source of capital. If all goes well, there will be high investments from Japanese and other International investors.
Also, Kadle told that the company chose Singapore only due to its transparent regulation with economic and tax advantages.

Andhra’s Realty Sector Grows

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The state of Southern India has shown a demand in Real Estate properties over the last few months which is a good news for the people of the trade.

The Realty Sector in Hyderabad, Andhra Pradesh has shown sudden upsurge after the recent political turmoil it went through. The demand for both, commercial and residential properties have registered an increase.

The trend is more evident in Tier I and tier II areas specifically; making them high demand markets.

Prabhakar, a Real Estate Sales Officer had this to say on the topic, “Market is improving as of now because of these developments happening in the Hyderabad areas like outer ring road area, Infosys campus and many other areas, so this is the right time to invest and to buy a customer.”

Even the prices of the realty sector have improved as the customers feel Hyderabad is the right place for investment thus increasing the sales.

Raj Kumar, Marketing Manager in a Real Estate firm puts forth, “NRIs, Doctors and Information Technology (IT) people are coming forward for the investment and even some of the central government employees are also coming forward. As you know, now a days comparing with the facilities what we are giving on what rates we are giving, people are seeing benefits and on these bases they are coming forward for investments and showing interest.”

The sector is one of the biggest in terms of number of employees working in the country. It is anticipated that in the next decade the realty sector will grow at a rate of 30% every year. This is bound to attract foreign investors with as many as 30 billion US dollars along with a number of IT parks as well as residential townships being constructed across our country.

Let us find some positive aspects of recession

Everybody is cursing recession as it resulted into slowdown in market. But, have you ever realized that there is always some positive aspect behind every off-putting phase. Recession has changed the point of views of consumers, lenders and developers as well. Consumers became more cautious during spending their saved money. On the other hand developers shifted their focus towards low cost housing.
Recession has made tremendous changes in real estate, various real estate giants showed interest in housing for middle class people rather than building a huge complex. Investors may seem to be winners with recession giving them an opportunity to pick investments at more realistic prices.