Each of the properties that are Residential, Commercial and Agricultural has its unique importance and pros. However, every property is different from another. The difference depends on the cost, location, revenue it gives and property tax too. Let us discuss in detail.
People buy or sell residential properties for investment. It differs from other properties due to many factors like tenants, property value, financing etc.
•For residential complexes, buyers or tenants are available no matter what the value of the property is because man is a social animal and needs a shelter to live in.
•Cash flow happens continuously. If it is on rent, and one tenant leaves the space, there are many tenants hunting for a home. You can get a regular flow of money by renting the property.
•Residential properties sell easily comparatively as it is the best property that has recurring demand.
•One can buy a residential property through bank finance. He or she needs to pay only a meager amount of 10 % of the total value of the house while the remaining amount can be financed through a reputed bank. The facility makes it convenient for even middle class buying a residential property.
•The resale of a new residential property is not difficult. One out of every fifth person is looking for homes to buy. Depending on the market rate, location, and amenities, a seller can fix the rate.
Property Tax on Residential property
The property tax on residential property is calculated on the basis of occupancy. If the property has been occupied by the buyer, the annual value of the property will be zero and it is the same when the house is neither occupied by buyer or tenant. In case it has been occupied by a tenant, the annual value will be calculated accordingly. The property tax on loans for either construction or buying will be paid as interest which can be up to Rs 1, 50,000 to a minimum of Rs 30,000.
Annual value for the rented out property is calculated as the maximum of the factors – Rent received from the tenant, valuation from Municipal Corporation and the Income Tax Department decided fair rent.
The sale and purchase of commercial property are a little hassled comparatively. Although, not to mention the income that one can earn out of a commercial property is more attractive than from a residential property of for that matter agricultural property.
•Commercial properties give one a regular flow of money. It gets better if it is located in an area that has more consumers of the product you sell.
•The maintenance cost is borne by the tenants as they can’t afford to lose on business. This is a benefit to the landlord.
•Unlike the residential properties which have a lease period of maximum 1 to 2 years, for commercial properties, it is 5 years. This ensures fixed income for the next five years.
•During off season, or any fall period when the businesses don’t run that well, the tenants can leave the place and move to a different location. This incurs a loss for both the parties and the owner has to bear the vacancy rates which are quite high.
•The loans by the banks on commercial properties by bank are not that generous. A maximum of 60% of the total value of the commercial space is paid while the buyer pays the remaining as down payment. It can dent one’s pocket.
•While there are no strict actions on tenants of residential property if the rent is paid late; however, in the case of commercial property, there can be strict measures.
Property tax on commercial properties
The property tax on commercial property is quite the same like that of the residential property. Different agencies use different calculations. Depending on the type of building or space, type of construction, rent, amenities etc. the property tax is calculated. It should be kept in mind that property tax paid late can incur late charges from anywhere ranging from 5% to 20%.
Property tax is decided and calculated by the local bodies and not any central government. There can be exemptions from property tax to senior citizens depending on the type of property he or she has.
Investing in an agricultural property is always beneficial. Historically speaking, no one has been at loss investing in agricultural farmlands or properties.
•The depreciation value has no place in agricultural property.
•The cost of agricultural properties is less when compared to residential or commercial properties and you get yearly profits.
•The number of buyers is increasing in India owing to its future prospects. The best part is that this property is income tax free. So whatever you earn, you are at profit. Win-Win situation aptly applies here.
•The need of a farmer and illegal encroachment may be an issue which doesn’t usually happen with other properties.
•The accessibility of the area from cities and places you live in can be a challenge although the value it has is not less than gold. Like the way gold doesn’t lose its value, the same holds for an agricultural property.
•The net return from agricultural properties is higher compared to other properties. With the years passing by, it will be difficult to find a single plot of land that hasn’t been occupied. That’s the demand this property has at present.
•Loans are available for the purchase of such properties at attractive interest rates.
Property tax on agricultural properties
Although the agricultural property is tax-free, after a bracket of the annual income of Rs 5000 in the financial year, the tax is calculated based on the income salary income as well as net agricultural income as per the usual income tax deduction slab.
Usually, the property taxes differ from one state to another. Checking with the local bodies is a better idea before deciding to pay the property tax.
Be it residential property, commercial property, or agricultural property, each of them has uniqueness. It depends on your needs and budget and future planning to make the investment.