Investing in real estate is inevitable and at some point, everyone takes this plunge. Investing in property is easily one of the largest investments one makes so it is always better to have a systematic and detailed approach. However, there is no fixed formula as everyone has a different purpose of investment- home for self, second home for rental income or investing for future appreciation.
Investing in property especially in Tier-1 cities is deemed as buying a flat. The inclination towards investing in an apartment in a gated community has taken over the residential real estate market over the past few decades. However, people still cherish the desire to buy a plot of land and build their own home. If the buyer is investing into real estate for second time or for investment purpose, the dilemma between investing in flat or a plot becomes stronger
Investing In Plot vs Apartments
Buying a piece of land grants the freedom to build the house of their dreams to the buyers which lacks in an apartment. On the other hand, if one is looking for a home, buying a ready-to-move-in flat as per budget makes complete sense. Investing in plots has both pros and cons and one needs to take into account these aspects along with the need and purpose of the investment.
Here are some factors which you need to consider if you are contemplating the big move:
1. Appreciation in Price:
Nothing appreciates like the price of land. A plot is expected to appreciate exponentially as compared to a flat due to vanishing availability of space in cities these days. So, the price of piece of land on the outskirts of the city is expected to appreciate more rapidly than an apartment or flat in the similar location.
2. No Depreciation Value:
Land does not depreciate in value with the passing years. In fact, as the time passes and as the land becomes scarcer, the supply-and-demand equation works in its favour. Contrarily, a building will depreciate in value with time, but land will not be affected this way.
3. No Extra fringes:
There is no waiting time in the dealings of the plot. Once payment is made, the buyer does not have any financial obligations, as plots are usually delivered on time. On the other hand, it may take some months or even years to get the possession of an apartment. If your choice of plot is part of a township, you are likely to get possession of the plot earlier than the flat.
Owner of a plot or land always has that extra flexibility of what to build and how much big to build and when to build.
5. Return On Investment:
While plot is not as liquid an asset as units of mutual funds, shares, recurring deposits or even gold, it is still easier and much hassle-free to sell off a plot as land is always in great demand. Selling off an apartment might not be as easy a cake as plot.
6. Plots With Perks:
Buying a plot or land was deemed as inconvenient as one would had to worry about electricity and water connection apart from road connectivity. However, lately various real estate developers are offering more than just land as they understand their client’s requirement. Many developers are now offering lands in gated communities with required infrastructure like paved roads, street lights, storm water drain and parks etc.
7. Rental Income:
Barring a few cases, plots do not generate any rental income as compared to flats and apartments if you are looking to invest for that purpose.
8. Loan and Tax:
Getting financial assistance for buying a plot is difficult as financial institutions tend to avoid giving loans for purchase of plot. Additionally, tax treatment for plots and flat is different. When you take a home loan to buy a flat or a builder floor, the monthly loan repayment allows you to save tax. In the case of plots, tax deduction on interest is allowed only from the time once the construction is completed.
While locality and price play similarly in both plots and flats, plots definitely have some added advantages if the purpose of the investment is looking for appreciation of investment. A clean investment in litigation-free land can have no recession or downturns and can turn out highly profitable. A plot in a decent location can appreciate rapidly as an asset in just a couple of years.