There is increasing interest in investing in land rather than constructed properties. This trend has merit, since land value appreciates while the value of a construction depreciates. In other words, buying land in a growth sector always makes sense. However, one should approach such land purchase with due caution and prior research.
Investment horizon
Purchasing land as an investment usually pays off only as a long-term venture, with a minimum holding period of between 5-10 years.
Safe purchase parameters
In general terms, it is definitely not safe to buy land without thoroughly acquainting oneself with the local market, and the legislative dynamics of that area.
Buying land situated near a housing scheme calls for extreme caution, since one may inherit the covenants and restrictions applicable to the housing scheme.
Ø While buying a plot as an investment, one should ensure reason able proximity to key roads and access to water and electricity.
Ø One should also acquaint oneself with the development plan for the chosen area – this can be established from the local administrative body.
Ø One should be very clear about what taxes one will incur and whether the plot has a permit for raising residential/commercial structures. Raising large structures is not an option on agricultural plots, which are cheaper and have a lower tax burden. If the plot is the agricultural kind, one should establish whether its status can be converted for construction purposes later on, or not.
Ø Before purchasing land, one need to investigate possible multiple ownership issue and zoning restrictions such as CRZ, NDZ etc.
Return on investment
The value of a plot of land in any particular location depends on what the government will permit to be done there, and on the success dynamics of the society in which the land is situated.
You cannot add to the value of land as you can to a structure - value derives from the dynamic community that makes the land desirable. Therefore, a plot's value will appreciate if there are developments in the vicinity to make this happen. Sometimes, investors purchase land based on anticipated value – something like a mall, multiplex or office block is scheduled to come up nearby If the anticipated development fails to materialise, or if the location does not receive water or electricity supply, the plot will fail to appreciate.
Land will also fail to appreciate if it is in danger of being taken over by the government for its own purposes.
No matter how good a plot looks, or how reasonable the price, one must check everything. The price may be low because certain legal sanctions or complications incurred during a previous ownership have rendered it a non-selling proposition.
Other factors to investigate.
Ø Availability of ground water
Ø Soundness of electrical supply in the area
Ø In case of residential land – avail ability of schools, colleges, medical facilities, domestic markets, public transport, etc.
Ø In case of commercial land – avail ability of retail outlets, post offices/couriers, telephone connectivity, other reputable commercial establishments in the vicinity.
Ø Availability or non-availability of the above will substantially influence the property's overall appreciation potential. Investment in commercial or residential land in an established growth sector with all of the above factors in place definitely makes a lot of sense.
Where are the best land deals today?
The most sought-after land for sale in
For smaller investors, buying a plot in an upcoming suburb or a potential-rich Tier II or Tier III town is a far more feasible option – especially in context with larger plots, which are out of question in metros.
Courtesy: HT, 12th Nov. 2007
With regards,
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