Residential vs Commercial
The words residential and commercial come from residence and commerce respectively. Hence, their difference is crystal clear to all. Residential refers to place that is used for purposes of living; commercial refers to a place that is used to gain profit, or conduct activities that are other than the simple purpose of living. However, there are many more subtle differences that people are not aware of, and this differentiation is used by authorities to tax properties differently whether it is stamp duty, electricity rates or any other utility bill. This article tries to highlight the differences between residential and commercial properties from the perspective of the owners, those who make use of them and the authorities that view these properties differently.
Before we move forward to understand the difference between a residential property and a commercial property, it is worthwhile to note that even banks differentiate between them and offer different rates of interest on mortgages of these two types of properties. Therefore, think twice before you decide to buy a property. Interest rates to buy a residential property is lower than the rate for a commercial property. Because, banks realize that a commercial property will earn for the owner, while residential property also will earn on its own, but slowly, as the values of property go up.
The most glaring difference between a residential and a commercial property is that the residential property is one that is used solely for living such as bungalows, apartments, condos, and cooperative societies. On the other hand, factories, malls, office structures etc qualify under commercial properties. It is thus clear that one lives in a residential property while he works in a commercial property.
For investment purposes, one has to decide beforehand as to whether he is buying a property to make homes or develop retail space. If the decision is to develop shops or offices, the property he buys should be commercial property as authorities develop properties as commercial or residential. Once bought, it is nearly impossible to make any changes in its usage.
Knowing the differences between the two types of properties is vital before taking an investment decision. The two properties are taxed differentially; authorities charge more from the owner for the registration and stamp duty, as they feel commercial property brings in higher return on investment.
Banks perceive commercial properties as riskier than residential properties, as it believes that owner of the residential property can be made to cough up the loan amount rather easily, which is not the case with commercial property buyers. Loans for commercial property are therefore for shorter tenure and carry higher rates of interest than residential properties that are often mortgaged at very low interest rates for durations as long as 30 years.
What is the difference between Residential and Commercial?
• Residential property is cheaper than commercial property, though there are exceptions.
• Residential property is solely for living purposes, whereas commercial property is used to give profit to the owner.
• Banks charge higher interest on mortgage of commercial property, and the tenure is much shorter than that on residential property.