rental income

Real Estate Investment: Residential vs Commercial – Which will fetch you high rental income?

For those looking to invest in real estate, rental income is one of the most crucial factors to consider. Over the years, real estate investment has been a reliable source of passive income with lower risks involved. Despite the market volatility and the turmoil caused by the pandemic in the past few years, the realty sector in India has been showing strong signs of rebound in recent times. However, several investors, especially the newbies, often get confused about which real estate sector they should opt for investment purposes – Residential or Commercial.

Residential vs Commercial, it is a never-ending debate in the real estate market. Many experts believe that one should invest in residential properties for better returns while others say Commercial Real Estate (CRE) is the modern way of investment, providing great opportunities to investors to expand their portfolio.

Which sector is good for earning rental income – Residential vs Commercial ?

The amount of rental income usually depends on the size of the property and location, architecture and amenities provided. Hence, to generate more rental income, one needs to invest more. Emerging trends like fractional ownership in real estate, however, are now providing a chance to even not-so-wealthy people to invest in high-end residential and commercial properties. Both commercial and residential real estate offer appealing income-generating options but the question remains the same: which asset is better to invest in?

Well, if we take the latest stats into account, the demand for residential properties in Tier II and Tier III cities has been growing at a strong pace in the post-pandemic environment. Growing interest of wealthy investors and NRIs in Indian real estate has also made the investment market more lucrative. Moreover, the resurgence of UHNIs, HNIs, and NRIs has also helped luxury and ultra-luxury developments gain more traction in this tech-influenced era.

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Among tenants, there has been a growing interest in the luxury segment as they prefer premium houses that offer the safety and security of a gated community. Not only this, the millennials now want larger and greener spaces with other facilities that promise a better standard of living. In addition to this, several homebuyers from today’s generation feel a luxury project is a worthwhile investment as the value of such property gets increased over time and it also gives a benefit of earning higher rental income to the investor.

Conclusion

Rental revenue is influenced by a variety of factors, including location, physical infrastructure, social factors and market trends. Notably, these variables have an impact on both commercial and residential properties. If you are looking for long-term investments that offer consistent rental ROI potential, you can put your money in commercial real estate. On the other hand, if you want to wait for increase in the value of your investment while getting a lower rental yield, residential property is an ideal option. The investors must consider all the factors such as budget, amenities, connectivity, and security prior to investing their hard-earned money into a real estate asset to earn the rental income.

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