- October 1, 2024
- Posted by: Muhammad Shehzad
- Category: Blogs
Converting residential property into commercial property is not a bad idea, as it increases the income potential and boosts property value. However, the process includes multiple financial, legal, and zoning challenges. Here is an exclusive guide for converting residential property into commercial property in Pakistan.
Converting Residential Property into Commercial One in Pakistan
A commercial property is an asset. Converting a spare residential space into a commercial one is quite common. Besides boosting the value of the property, it generates passive income. Complying with the zoning laws and other regulations is mandatory to avoid any inconvenience later. Below are the considerations you should keep in mind.
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Zoning Laws & Permissions
You must head to the local authorities for approval to convert a residential property into a commercial property. Depending on the location of your property, you can go to the Lahore Development Authority (LDA), Karachi Development Authority (KDA), or Capital Development Authority (CDA).
The zoning regulations vary from city to city. You must consult the relevant authority to evaluate your property if it falls under commercial conversion. You might require a rezoning application if your property is in a strictly residential area. You can also consult the local real estate agent or seek legal assistance for guidance.
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Legal Approvals
The conversion process requires a No Objection Certificate (NOC) from the relevant authorities. The NOC formally indicates that local governing bodies have no objection to converting your residential property into a commercial one. There is no way to avoid NOC; you must pay hefty fines and take legal action in the worst cases.
It is best to hire a legal consultant familiar with the property conversion laws and who can comply with the local ordinance while streamlining the whole conversion process.
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Structural Modifications
When the legal aspects are done, the next step is structural modification. Commercial properties need to adhere to certain building codes. These codes include parking spaces, fire exits, accessibility for the disabled, etc. Suppose you are turning your home into an office; you must make certain modifications and redesign the property (installing signage and emergency exits) to ensure it meets commercial standards.
Also Read: Banks that provide home loan facilities for the Pakistan real estate
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Tax Considerations & Financial Implications
Commercial conversion will make your property eligible for higher tax rates. In urban prime locations, tax brackets are much higher than those for residential properties. In addition, you will be getting more utility bills due to expensive units. It is best to consult a financial advisor to make an informed decision by calculating the potential ROI before switching.
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Market Value & Rent Potential
Commercial properties get you more rent than residential properties, specifically in the Pakistani market. Converting a residential property into a warehouse, office, or shop means higher-paying tenants. Also, the location of the property matters a lot. For instance, due to high foot traffic, Saddar, Karachi, or Gulberg properties in Lahore would have greater commercial value.
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Neighbourhood Impact & Community Concerns
Wrap Up
Converting a residential property into a commercial one will give you financial benefits. It will increase the market value of your property and is highly profitable. All you need to do is ensure its compliance with the local regulations, do the necessary structural modifications, and be good to go. Good Luck!