Which type of property offers better returns – commercial or residential?
Investing in India’s real estate sector has always been considered a safe and attractive option. Especially in Bengaluru, often referred to as India’s IT capital, the number of people investing in property is constantly increasing. But the biggest question before investing is always this:
Do commercial properties offer better returns than residential properties?
In this blog, we will conduct a comparative analysis of both types of properties, keeping the Bengaluru location in mind, to help you make the right decision. What is commercial property?
Commercial properties are properties that are used for business activities, such as:
- Office space
- IT Park
- Retail shop
- mall
- Warehouse
- Co-working space
Popular commercial locations in Bangalore
- Yelahanka
- Whitefield
- Outer Ring Road (ORR)
- Electronic City
- Sarjapur Road
- Hebbal
What is residential property?
Residential properties are those that are used for living purposes, such as:
- Apartment
- Villa
- Independent house
- Plot
Major residential areas in Bangalore
- Whitefield
- Kanakapura Road
- Devanahalli
- Hennur Road
- Bannerghatta Road
- Mysore Road
What is Return on Investment (ROI)?
ROI stands for Return on Investment, which means how much profit you received compared to the amount of money you invested.
In real estate, ROI is obtained in two ways:
- Rental income
- Capital appreciation (increase in property value)
Returns from commercial property (Bengaluru)
1. Higher rental yield
- Commercial properties typically offer rental yields ranging from 8% to 12%.
- In some areas of Bengaluru’s IT corridor, it can reach as high as 15%.
2. Long-term lease
- Typically, the lease is for 5 to 9 years.
- Reduced worry about frequent tenant turnover.
3. Stable income
- IT companies, MNCs, and branded retailers pay rent on time.
- Income is more predictable.
4. Low maintenance hassle
- In most cases, the tenant bears the maintenance costs.
Damage to commercial property
- The initial investment is high.
- There is a risk of vacancies when the market slows down.
- Low liquidity (difficult to sell)
Return on residential property (Bengaluru)
1. Safe investment
- There is always a demand for accommodation.
- The risk is reduced.
2. Easy Finance
- Home loans are easily available.
- Interest rates are low.
3. Capital Appreciation
- Prices are constantly rising due to the metro, IT parks, and infrastructure development.
- Areas like Whitefield and North Bangalore have seen good growth.
4. The option of living alone
- You can use it yourself as well as invest in it.
Damage to residential property
- The rental yield is only 2% to 4%.
- The problem of frequent tenant turnover
- Maintenance costs have to be borne by the owner.
Who should be chosen in Bengaluru?
Commercial property is right for you if:
- You want high rental income.
- You have a large budget.
- The plan is for long-term investment.
- The ability to take risks
A residential property is right for you if:
- Are you investing for the first time?
- There is a limited budget.
- Looking for safe investments?
- I plan to live alone in the future.
Expert advice for investing in Bangalore.
- Choose a property near the IT hub.
- Invest only in RERA-approved projects.
- Check the developer’s credibility.
- See future infrastructure projects (metro, ring road, airport connectivity)
Conclusion
If high returns and stable rental income are your priority, then commercial property in Bangalore could prove to be a better option. On the other hand, if you want a safe and low-risk investment, residential property is suitable for you.