There are many people who have more than one property. Usually many people keep a second home as an investment to get a return at some point in life. Many homeowners often plan to invest it further by turning the residential property into a commercial one. But it is not an easy task to convert a residential property into a commercial one in India. You have to go through many steps before you can finally utilize your place to earn profits.
But before that let’s get to know what is commercial property and why it is an absolute necessity to transfer a residential property to a commercial one.
By commercial activity, it means all the businesses which include sale and purchase of products and services with an underlying aim to yield profit. At times the business will suffer losses too. These are the commercial activities. When you plan to start a business and wish to utilize your unused residential property for the business only, then it will house all the commercial activities too.
Now comes the tricky part of converting the residential property to a commercial one in India.
Points to Know Before Transferring the Residential Property to Commercial One :
- Zoning Laws : The local municipal authorities and the lawmakers created zoning laws which is the main point as it covers the property usage and construction process.
- Regulations of Zoning Law : This is the regulations that come with the zoning law. As per regulations the land usage of any locality is ascertained. A municipality may have a rule for a locality preventing them from doing business or establishing industries in a specific residential area.
- Jurisdictional Regions : All jurisdictional regions are divided into several categories under zonal authorities like residential, commercial, industrial, public utility, open parks, gardens, playgrounds, agricultural area & transport area.
- Demarcation : These laws demarcate between residential and commercial areas.
- Commercial Areas : Commercial areas are buildings housing commercial activities, which also include professional services, showrooms, theaters, movies, hotels, restaurants, nursing homes, community halls, clubs, banks, etc.
- Varied Zoning Laws : Zoning Laws vary from states to states and cities to cities. Some have restrictions and some don’t.
- Inclusions : The Supreme Court has clearly stated the type of activities which are not allowed in residential areas. That would be – banquet halls, any activity dealing with inflammable, hazardous or polluting procedures/substances, retail shops for junk food, building materials, printing, liquor, varnishing and dyeing, repair shops for cars and bikes, and professional activities.
- Exceptions : The exceptions are doctors, architects, chartered accountants and lawyers. They can use a given percentage of their residential units for their professional activities.
- Noise Limits : All institutions be it residential or commercial should adhere to a given noise limit as mentioned by the authorities.
- Inclusions in Residential Areas : The residential areas can have hostels, homes, orphanages, old age homes, milk collection depots, worship places, schools, libraries and alike in their locality.
Process to Convert Residential Property to Commercial One in India :
- You have to visit the local municipal authority of your city.
- You need to apply to the municipal officer for the conversion of residential property into commercial property.
- You need to provide the details of your business such as company registration documents and company ID.
- Size of the business and nature of the property should be disclosed.
- You have to mention the address of the property.
- Once your application is viewed, the authorities will investigate your business.
- Your application approval will be in the hand of the Municipal commissioner if he/she finds that there is no harm to the other resident of that locality.
- Only then your application will be taken forward for consideration.
- Medical and legal practitioners do not require licenses.
- In case you are a tenant at a building, to carry out any commercial activity, you need to get a NOC from the landlord.
- Housing societies may impose higher maintenance costs and parking charges in case you are carrying out commercial activities from there.
- Due to your commercial activities, the electricity bill that you will pay might be charged as a non-domestic rate. You might have to apply for a commercial meter to continue all activities.
- You will have to pay higher property tax due to the commercial activities that are carried on your premises.
- Commercial charges will be applied on water supply and other utility bills depending on the type of business, property and area size.
- Activities like tuition class, painting, dance, yoga, and teaching are not included in this list and so no extra charges will be levied on these.
Hope this article will help if you are considering converting your residential real estate into a commercial one. If you have any more questions, you may drop in the comments box and we will try to answer to the best of our knowledge.
Also, read our article on: “Using a residential property for commercial purposes”