Conversion Of Residential Property To Commercial Property

Last Updated at: Oct 16, 2020
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On March, 2020:

In 2020, the commercial real estate is expecting a boom. As the Indian economy wishes to touch the $5 trillion mark by 2024-25 commercial & logistics real estate is destined for better times. As the current growth of the residential real estate is not up to the mark, there has been an upsurge in the conversion of residential properties to commercial ones.

In a recent case, Mumbai based doctor Deepika Khurana wanted to covert one of her room in the rental flat into a clinic. When she consulted the landlord for the same, she was told that she needs to pay the extra amount of rent as he will be liable to pay commercial property tax. When she took the legal advice from an advocate, it was confirmed that the landlord needs to pay an extra amount as commercial property tax when a residential property is used for the business purpose.

Everyone is free to use or rent the residential property for the commercial purpose if the housing management rules and the zoning rules allow it. When it comes to the conversion of residential property for commercial activities different states have different kinds of rules and regulations. In some states, doctors, lawyers, chartered accountants etc. are allowed to use 30% area of the residential property for the commercial purposes whereas as in some states it is not permitted.

If the state is allowing the conversion of residential property to commercial property, then one should get a sanction from the housing society before the property being converted. Depending on the kind of business, it is also essential to get the approval from the local municipality authority for the conversion. When a property is designated as a commercial property, it is always treated as a commercial property for all resolutions.

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Three things that need to be kept in mind before converting the residential property into a commercial property are as follows;

  1. Acquire a shop and establishment license from the concerned municipal authority.
  2. Before applying, be careful about the kind of business that is carried out and the area that is required.
  3. Commercial charges would be levied on the property, power supply, water, etc. depending upon the property size, depending upon the area and the nature of business activity by the civic body.

It is necessary to note that not all the business that is conducted in the residential area are charged with commercial taxes. For example, the people who teach dancing, singing, painting, yoga or give tuition classes are free to carry their business without paying any kind of commercial taxes.

Defying any of the rules and regulations of the government by conducting commercial activities in the residential area without the conversion of land may lead to severe legal complications differing from state to state.  It is always suggested that it is better to take legal advice, follow proper rules and regulations and then take a further step. Imagine conducting a growing business without a proper conversion and then facing so many legal problems which will ruin the company and mental peace?

So, it is always suggested that you follow all the rules and regulations and do a happy business without any complications!  Email us at for assistance.