The financial conditions and inflation call for rational measures to be taken for a safe and secure future. With current employment conditions and salaries, everyone seeks safe and reliable ways to increase their income. What could be better than investing in property in Pakistan? Not only is it highly profitable, but investment in property also involves very low risks. Unlike other means of investment like cryptocurrency, bonds, shares, and mutual funds, property investment is very lucrative and has limited or no chances of loss.
Investing in a tangible asset like property is fortified as it provides long-term financial stability and one can achieve a considerable return on investment as well. Now that it is established that property investment is the safest option available in Pakistan, let’s learn whether one should be investing in residential or commercial property but before that, it is necessary to understand the difference between residential and commercial property.
The property mainly used by people to reside in is considered a residential property. It could be a studio apartment for a single person or a couple or it could be a bungalow, condo, multi-stories home, penthouse, or even a duplex for a nuclear or joint family.
The property built for the purpose of business activity is called commercial property. From the office to a hotel or wedding hall, a warehouse, or a retail shop, all come under commercial property.
The Right Kind of Real Estate Investment in Pakistan
While there are many options for real estate investment, residential and commercial are the only two options that are often explored by the people in Pakistan. If you are indecisive about whether to invest in residential or commercial property in Pakistan, it is suggested to understand the factors and explore the options and outcomes of investing in any of the two investment opportunities to reach an educated conclusion. Below are some major factors that you need to understand to make an informed investment decision.
What is the Purpose of Investment in the Country?
The purpose of investment will make it easier to choose one of the two options. That said, if you plan to dwell yourself or want to have a stable rental income then residential property is a better option available for you as the need to have a shelter is always constant. It can also serve as a long-term lucrative investment for its resale value.
If business investment is your purpose and you plan to either resale it or rent it out for a commercial purpose for example a shop, a bank, or an eatery, then investment in commercial property should be your choice.
Cost of the Property
Residential Properties can be invested in with limited funds but that is not the case with commercial properties, they are often highly expensive, and renting or reselling them are a bit trickier as well. The cost of residential property is dependent on location, project value and reliability, and the amenities that can be provided with it; the cost can even vary from city to city with residential plots in the metropolis will be costlier than in suburbs or towns.
The several factors that can alter the cost of commercial property are the location, the project, the accessibility to the property by the customers, and the total area of the property. The bylaws further add to the cost.
The Type of Property Available for Investment
For residential investment, you will have the option to invest in a house, an apartment, a bungalow, or a flat whereas commercial investment has several options to choose from such as a shop in the mall or shopping plaza, an office, a warehouse, a hospitality sector such as a hotel or an eatery or a restaurant.
If you plan to deal with limited bylaws and have design freedom then investing in residential property is your option. For anyone who strictly wants to consider property investment as a business and can deal with strict bylaws, and stringent regulations to acquire permission then commercial property investment is a better choice.
The Demand from the Consumers
Irrespective of the condition of the economy of the country, the need for a home remains continuous, therefore, residential property investment will always yield profit though the percentage will vary with respect to the time and condition of the country. Commercial properties, on the other hand, can become stagnant and burdensome during times of economic turmoil as, irrespective of the availability of the consumer, the property and its condition have to be maintained. But commercial property investment has its pros as well. Once rented, the occupancy usually is for a long duration as businesses do not prefer to relocate often.
In residential property, though the maintenance cost and taxes are low, the property owner has to bear it, whereas, in commercial property, the tenant can either share a burden or has to completely take the burden of maintenance.
The Investment Return
It is understood that the investment return gained from a commercial property is always higher and more remunerative than that of a residential property. A shop in an ideal location with a running business will be able to get more resale value than a bungalow used for residential purposes. Also, with time, the maintenance cost of residential property can become exorbitant but an old shop in an ideal location will still bring in more profit irrespective of its condition.
The factors above have highlighted the pros and cons of each type of property. Depending on your purpose of investment, the budget you have, and the time you can invest, you can decide what option of property investment will prove profitable for you. If a stable income is a goal, commercial investment can be more beneficial as you will not need to search for tenants from time to time as businesses prefer stability and do not want to relocate often. To test the waters, you can start by investing in residential properties and can switch to commercial property investment once you gain considerable knowledge of the real estate market of Pakistan.