When people think of investing in real estate, they usually favor buying an apartment. Purely from the returns perspective, however, investing in a plot may be a better idea.
Plot versus Apartment:
There are many advantages of investing in a plot. The entry barrier for investing in real estate is high if you buy an apartment. On the other hand, you can begin investing in a small plot with just a few lakh rupees.
Having purchased the land, you don’t have to spend too much on it. “All you have to do is construct a wall around it. If the piece of land is large and there is a risk of squatting or forcible occupation, then perhaps you need to station a guard there. On the other hand, in case of an apartment, you may have to spend a lakh or more after getting possession before it is ready to occupy,“ says Pradeep Mishra, head of a realty consultancy.
In the case of a building, the value of land appreciates while the value of buildings depreciates as time goes by. In the case of land, your entire investment appreciates with time.
Choosing the Right Plot:
Connectivity is an important issue which you should factor when buying a plot.
Even if you are investing in a distant locality, say, on the outskirts of a city, you can be assured of getting a good return provided the plot is close to a highway or a main road. If a Metro line is planned for the area, then appreciation on the plot can be very high.
State governments and municipal bodies have their own websites where they put up information on infrastructure development in the area, the companies that intend to set up their manufacturing centers in that area, and so on.
“If you invest in a plot in an area where there will be a lot of infrastructure development, or where the prospects of employment generation are high, you are likely to get good returns,“ says Rajan Ahuja, director of Realty and Verticals.
The orientation of the plot also matters a lot. Most buyers prefer plots that face east or north. The road running in front of the plot should be wide enough to allow easy access.
Make sure that the plot is not close to a graveyard or a garbage dump, or else you will find buyers hard to come by.
If you are buying the plot in an already established area, look at the profile of the people living there. Brokers say the social and financial status of people living in an area also determines its attractiveness.
Make sure you don’t pay excessively for the plot. Get information on the price at which recent transactions have taken place in the neighborhood. You should be able to buy in a similar range.
After the Purchase:
Make an assessment of how soon you will get possession of the land. The earlier you get it, the sooner you can put it to some productive use.
Squatting and forcible occupation are the biggest risks for those investing in land. To reduce this risk, you may invest within a colony or township being developed by a developer.
Alternatively, you may build a wall around the plot, construct a small room in one corner, and have a guard live in it. If the location is far away, make regular visits. If you get to know of some activity aimed at taking over your property, report to the police at the earliest.
Become a part of the RWA. If you are buying from a builder, enroll with the maintenance agency and pay the maintenance fee on time.
Fast Fact: There are many advantages of investing in a plot. Foremost being you can begin investing in a few lakh rupees while the entry barrier for investing in real estate is high if you go for an apartment.
Source: Times Property, Dec 06, 2014