Using a residential property for commercial purposes

Jun , 2
Using a residential property for commercial purposes

Nowadays, it is seen that people are using the residential property for commercial purposes because it helps fetch higher rental income. As per the rules, a limited area or a small part of the residential property can be used for commercial purposes. 

Office space is very important for businesses that want to grow and evolve. As per some states where the laws are a little bit lenient, it is permitted to use up to 30 per cent of residential property for commercial purposes by professionals like doctors, lawyers, etc. 

Is there any law that regulates the use of residential property in India?

Yes, created by the local municipal government, the zoning law deals with the usage of properties across cities. Regulations under the zoning law dictate the use of land in a given area. This law aims to protect the residents of residential areas from the negative impact of commercial activities and also helps them facilitate the development of commercial areas.

Let us talk in detail about the law:

As per the law, some of the approved commercial activities in any residential area are the services of resident advocates, lawyers, doctors, accountants etc. Even if the state allows or permits you to use a portion of the property for commercial use, you still have to seek permissions from the society and local municipal office depending on the nature of the business. Though you can use a residential property for certain commercial activities, there are some activities like the transiting of goods from residential premises which are not permitted and you might want to look at obtaining special permissions for doing such activities. A property once marked as commercial, that property would be treated as a commercial property for all purposes, including taxation. But as per the directions of the Supreme Court, there are some activities with cannot be permitted inside residential premises such as:

  1. Banquet hall.
  2. Automobile repairs.
  3. For selling construction materials, liquor, junk food etc.
  4. Any activity that involves the use of hazardous or combustible substances.

If you want to do a commercial activity on residential premises in Mumbai, you need to obtain a No-Objection Certificate (NOC) from the respective society. A total of 220 sq ft in a residential apartment can be used for commercial purposes. Societies permit individuals to do back-office work in their residence but to use the property as godowns, warehouses, cold storage and laboratories are not permitted.

Some points you need to keep in mind:

In case you intend to convert a section of your house into an office, these are some important things you need to keep in mind:

  1. Obtain a shop/establishment license from the concerned municipal authority.
  2. You need to be clear about the amount of area you require and the business you intend to carry out before you apply.
  3. You might need to pay more amount as property tax if you are converting your residential property into a commercial one.
  4. Depending upon the area, the size and nature of the business, the civic body would levy commercial charges on the property for electricity and water supply. 
  5. Some services that are exempted from paying commercial charges are teaching yoga, painting, dance, and taking tuition classes. You need not take a permission certificate from the Government authority to do such businesses. These activities can be done without converting your residential property into a commercial one.

You might have to face severe repercussions and legal complications if you defy the regulations prescribed by the Government and conduct commercial activities in residential areas without converting them. You need to comply and conform to the rules and regulations prescribed by the Government in order to smoothly conduct your business in the residential property.

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