Residential Or Commercial: Which Is More Profitable For NRI Real Estate Investment?

NRI investment
NRI investment

Are you an NRI? Do you think that investing in Indian residential property is the most profitable real estate avenue? If yes, then the latest research by ANAROCK might surprise you.

As per the latest reports by the leading real estate consultant pertaining to NRI real estate investment, India’s commercial office property is a much more profitable alternative than residential property. While a good residential property can give 1.5 to 3.5 percent rental yield, a commercial property can bring 6 to as high as 10 percent rental yield in the same period, as per ANAROCK.

Indian commercial properties, especially office spaces, saw an upsurge in 2017. Thanks to REITs, the space is seeing a surge in both supply as well as demand. While approximately 11 million sq. ft. of space was absorbed in Q1 2019 alone, the supply touched 7.5 million sq. ft. in the same time in top seven cities.

Some of the factors driving the strong commercial office space real estate are:

  • Strong economic fundamentals,
  • Constant demand for quality Grade A office space,
  • Relatively affordable rents,
  • New co-working office space trend in key markets

Over last couple of years, NRIs are showing keen interest in commercial properties. And why not the case as this investment avenue has its own set of benefits.

  • Once invested in commercial office space, NRIs can lease their property for long term without bothering the upkeep of the place as the maintenance of the property is usually the responsibility of the tenant.
  • Loans are available for NRIs to invest in commercial properties. However, the interest rates, loan processing fee, tenure of loan might differ than that offered in residential properties.
  • Investment in commercial properties not only comes with better rental growth but also with better capital appreciation.
  •  Commercial property is one of the best options when it comes to maximum returns and generation of fixed income while maintaining a low-risk profile.

However, NRI real estate investment in commercial properties comes with its own set of minor drawbacks.

  • Commercial real estate requires larger investment than residential ones.
  • Finding the suitable tenants for office spaces can be way more complicated than for a simple residential property.
  • Commercial properties do not offer the emotional connect which homesick NRIs are often looking for.

 Having said that, it is always suggested for every investor to do due diligence before opting any property for investment purpose.

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