Benefits and drawbacks of land investment!
Given the high Returns on Investment, land investment is frequently prioritised above other real estate investment opportunities (ROI). However, before you take the leap, you must first grasp the benefits and drawbacks of investing in plots. outlines the asset class and identifies its primary benefits and drawbacks to assist you in making an educated selection.
Real estate is one of the top three preferred investment alternatives among Indians. Among the different property types accessible, land is by far the most popular. It has stayed relatively a perfect alternative for the investor community, owing to a higher Return on Investment (ROI), higher resale value, and cheaper maintenance cost. However, specialists recommend conducting a thorough review before taking the leap. Land investment, like any other financial commodity, has drawbacks ranging from restricted supply to ineffective taxation.
Benefits of Land Investing
- Low initial investment
Investors frequently have difficulties in purchasing a property, particularly in metro centres such as Delhi, Mumbai, and Bangalore, where property costs are greater than in the rest of the country. In such a case, investing in a plot, particularly in emerging markets, provides a simple entrée into the market. The city’s outskirts provide residential plots at lower costs than the established regions or city centres. Purchasing a land parcel in Mumbai’s outskirts, such as Palghar, Manor, Boisar, and Dahanu, may be a profitable investment for cash-strapped purchasers or those wishing to invest in second homes or holiday houses.
- Several applications
Among the most significant advantages of purchasing land is the ability to customise it for any future use. It may be used for poultry farming, agriculture, or building a house. “An investor might sell the land to a developer for building of residential or commercial complexes,” says Niranjan Hiranandani, CMD of Hiranandani Communities. Alternatively, under RERA, you can enter into a joint venture arrangement with a real estate developer. Not only does the investor have an exit strategy, but he also receives a portion of the profit in the form of a freshly built unit.”
- Increased resale value
Land appreciates at a faster pace than built assets because land remains in the same state until damaged by weather or erosion. Furthermore, a restricted supply of land assures heightened market rivalry, resulting in higher price points.
- Maintenance is reduced.
The expense of keeping a plot is typically less than that of a built property. You won’t have to worry about recurring repairs or upgrades. Plots require no further upkeep other than mowing or fencing and hiring a guard for observation.
Land Investment drawbacks
- Scarcity Of Land
The demand-supply dynamics are a key source of worry. While demand for land is always increasing, availability is decreasing. Due to a growing population and infrastructure projects in full throttle, land availability has plummeted, especially in large metropolitan areas. Only the outskirts assure the availability of land lots, and even then only in restricted quantities. As a result, if you are considering purchasing a plot in a Tier I city, keep in mind that the sole available site is on the outskirts.
Plots are prone to invasion. Several examples of unlawful land confiscation have been documented around the country. In 2016, around 18000 incidents of land invasion worth Rs 60,000 crore were detected in Bangalore alone. The disturbing data demonstrates the level of risk associated with land investment. Despite your ability to submit a report and engage a solicitor, the legal fees will likely be substantial. When purchasing agricultural land, it is critical to investigate the ownership data for the last 30 years. The government may seize agricultural land for infrastructure construction or commercial ventures.
- Intangible asset
Reselling a plot might be difficult. As land values rise at a quicker and faster rate, finding a buyer ready to pay a greater price may become difficult. Land, unlike other financial instruments such as gold, mutual funds, or even periodic deposits, cannot be parted of quickly when you need to encash it. It might take years to locate a suitable buyer, which defeats the objective of the investment.
Disclaimer: The views expressed above are for informational purposes only based on industry reports and related news stories. PropertyPistol does not guarantee the accuracy, completeness, or reliability of the information and shall not be held responsible for any action taken based on the published information.