5 Factors That Determine Price Of Plots
Land is an important asset and investment in land or plots, is known to be lucrative as it assures better appreciation and offers higher long-term returns for investors. This is particularly true when compared to residential properties. The value of any property, besides factors like its structural attributes and location, is significantly influenced by its land rates.
The value of land has increased manifold in the last 20 years. So, for anyone who is considering investment in plots, it is essential to understand the major factors that impact land pricing. MakaanIQ explores the major factors which determine prices of plots.
Location is a crucial factor which determines the price of land. The kind of development that takes place in the area, affects the land price. Proximity to main roads, transport linkages, upcoming highways, population centres or an important landmark, leads to a higher appreciation of the plot. Also, land which is surrounded by greenery is priced higher than plots surrounded by industries or factories. With increasing land scarcity, governments in many Indian states, are working on land norms to facilitate the conversion of agricultural land for non-agricultural use.
The topography, soil quality, climate, presence of ground water, etc., have a significant influence on the land price. For instance, land with weak soil or rocky terrain, will be unable to support the structures and thus, will be less preferred. The fertile agricultural land will fetch more value than a plot with no prominent features.
Demand for land
In simple terms, anything which is tradable and available in plenty possesses lesser value than something which is available in less volume. Property prices in prime locations of any city are higher than prices in the suburbs since such prime areas are equipped with all facilities and thus, attract investors and buyers. Similarly, land parcels in city outskirts, are available in plenty and are more reasonably priced.
Industrial development in a location, too, has a direct implication on the plot prices. Plots located in an area with extensive economic activities such as markets or industries, etc., command higher prices.
Floor Space Index
The Floor Space Index (FSI) or Floor Area Ratio (FAR), is a vital factor influencing plot prices. FSI is determined by parameters like plot size and width of the road. It denotes how much space in a plot can be utilised for construction. The FAR is restricted by the zoning code and impacts the land value. If the planning authority increases the FAR, then the market value of the plot increases.
Present and future land use
Often, the government or local authorities place restrictions on the kind of development that can be done on the land. Land value is also fixed by the land use permitted in the land premises. This is also a crucial factor for land pricing. Usually, industrial or institutional land use attracts higher prices.