People are increasingly seeking methods of building a passive income every day. Professions like home cooks and entrepreneurs of small businesses have risen consequentially especially following the lockdowns due to the pandemic. This is why converting residential properties for commercial use has become quite popular recently. 

However, if you are considering converting your residential property for commercial use, there are a few limitations and applicable laws to abide by.  

Owning a commercial space is a great way to establish and increase your business. But, if you’re unable to secure a place, you might consider using your residential property instead. In such circumstances, you will require permission from zoning regulations and the management of your society. 

But wait a minute! Let’s first look into which professions are permitted to operate in residential areas.

Among various commercial operations, professionals such as accountants, doctors, and lawyers are permitted to provide their services according to legislation.

What Is The Difference Between Residential And Commercial Property?

Let us first delve into the difference between residential and commercial property:

Domestic Zone 

This zone is an area located for residential properties such as plots, flats, detached houses, and floor flats. These regions may enclose hotels or motels; however, department shops are not included.

Business Zone 

This area consists of commercial stores, office towers,  retail malls, hotels, clubs, restaurants, etc. Commercial Zone regulations manage the business zone. These regulations define the permitted commercial activities in specific zones. For instance, it is prohibited to conduct commercial operations close to religious sites like churches, temples or mosques. 

Now that we have a clear view of the difference between the two types of zones, let’s now move on to find out a bit of residential property legislation.

What’s India’s Legislation For Residential Property Usage?

In India, the municipal authority or government enacts the Zoning Law, which regulates land use in all cities. Zoning laws specify how land can be used in a particular area. This helps to distinguish between commercial and residential areas.

Why so? 

Well, this is in order to shield citizens from the negative effects of commercial activity, while still promoting the expansion of certain business sectors.

So if you want to convert your residential property for commercial use, there are three things you need to do.

• Obtain a licence for your store and establishment from the relevant municipal body. 
• Be certain of the location you’ll need and the type of business you’ll run before submitting an application. 
• Depending on the location, the size of the property, and the type of business activity, the civic body would impose commercial fees on the property as well as the water and power supply.

Some businesses can operate without a government authorization document. Tuition, art, dance classes, yoga, and teaching are mostly exempt from commercial costs. This means you can operate these businesses without altering the property.

If you engage in commercial activity in a residential zone despite government restrictions, you may face serious legal consequences, depending on the state. For instance, in Noida, operating a business from a private residence carries a fine of 1% of the property’s total value, which is a significant amount.

So if your state permits the conversion of residential property for commercial use, you must ensure that you seek permission from the concerned authority. Your society should first give its approval, then the local municipal office. To turn a residential property into a commercial one, permission from the municipal office is required. The property will be taxed as commercial property once it has been designated as such.