Pros And Cons Of Investing In Plots
Investors and home buyers often wonder, what would be the right option for investing, plots or apartments? Most of us decide in favour of land. Land as an investment option is always popular because of its better resale value when compared to residential properties. However, investments in plots have their own merits and demerits.
MakaaniQ lists the pros and cons of investing in plots.
Prices of land are relatively lower when compared to residential properties. Property tax from plots is also lower in comparison to apartments. Besides, there are no maintenance required, leading to cost savings.
Plot prices vary with location, size and available space. Prices of land parcels appreciate at a much faster rate than the rates of an apartment. Land prices are bound to appreciate if the basic infrastructure around the property grows, thus ensuring higher returns on investment.
Plots are delivered without any hassles and faster than apartments. Besides, the buyer has no financial obligations once the payment is made.
Purchasing a land gives the advantage of construct a larger area suiting one's requirement and affordability. For instance, one cannot increase the number of rooms in an apartment whereas one can do so in case of land, after acquiring necessary permits and sanctions.
Although investments in land is a simple and transparent process, there remains a risk of land being taken over by the government through compulsory acquisition. Land could involve buyers in prolonged legal battles. Buyers need to check if there are any encroachments on the property.
Investments in land demands huge capital requirement. Banks offer home loans on all apartments, irrespective of location or type. However, lands are considered a riskier asset and banks do not prefer to finance them, unless they are purchased from a reputed government development authority like the DDA (Delhi Development Authority) or the MHADA (Maharashtra Housing and Area Development Authority).
While seeking home loans, a buyer can claim tax benefits with respect to interest payment as well as principal repayment, under Section 24 and 80C of the Income Tax Act. No such provision is offered for interest paid on money borrowed for investing in land.
Limited supply of land and increasing need has generated a huge demand for plots in the country. This has, however, not affected the rates of land like other assets such as equity and gold.