Converting Residential Property into Commercial One

Do you have a residential property that you don’t need for residence, and want to capitalise on it? It might not be a bad idea to convert it into a commercial property. If you are already planning to do that, we have you covered.

Following are some of the things you need to know if you want to convert your residential property into commercial.

Society By-laws and Conversion

According to Maher Azeem Estate CEO Maher Azeem, you simply cannot convert residential property into a commercial one if you live in organized, gated societies that have their own bylaws. The provision against this is found in the bylaws of almost all such societies, so that is generally not an option, especially in some of the bigger projects like Defence Housing Authority (DHA) or Bahria Town.

Commercial Districts

Dream Ambassadors CEO Saleem Ghouri, said that even outside these societies, not just any land or building can be converted into commercial property. Citi Associates CEO Muhammad Shafi Jakvani explained that in bigger cities like Lahore, Karachi and Islamabad this can only be done in what the local authorities have demarcated and notified as commercial districts. If you need to find out whether you can commercialise your property, you can find out from the local authorities’ office of the city where your building is located. These commercial districts are generally located around some of the major roads and avenues.

Permissions

In areas that haven’t been designated as commercial districts, policies differ between cities. According to Azeem, in some cities it is not allowed at all, while in other cities like Lahore, the authorities can allow residential property to be commercialised. However, a permission has to be obtained from the development authority, which ensures that the property is not used for purposes which can be harmful to the surrounding residential area.

According to a news source, a no-objection certificate (NOC) also has to be obtained from the adjacent neighbours – the ones on the immediate left, right and the rear of the commercial property.

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Azeem explained that an advertisement has to be placed in one of the dailies, advertising the intention of the owner to commercialise the property. In case no objection is raised by anyone in the public, the owner can proceed with the conversion.

Paperwork and Fee

Once all these phases have been cleared, you can go to the development authority to initiate the paperwork and the process. There are two options available at this point, according to Azeem – annual or permanent commercialisation.

According to a news report, the annual conversion requires renewal each year on a fee that is a small percentage of its total commercial value – in Lahore, it is 1.25%. In case of a permanent conversion, the fee differs according to the area and its commercial value.  According to Jakvani, in Karachi, it can vary between PKR 4,000 and PKR 16,000 per square yard, while according to Azeem in Lahore it can range between PKR 5 million and PKR 15 million per kanal.

Jakvani explained that here is an ever-increasing demand for commercial property. The incredible number of malls and plazas that have sprung up around the country are testament to that. However, the demand is not being met at many places. Conversion of the residential property into a commercial one may seem like the only option in such cases. Moreover, because of its greater return on investment and its value which can increase two to four times depending on location, it is an option many would like to consider.

We hope that this will help you make better and informed decisions if you are looking to covert a residential property you own into a commercial one. If you have anything to say, please use the comments section below. For starting a conversation on the topic, please make use of the Zameen Forum.