Should you invest in a flat or in land?

By: Sachin Agarwal, CMD, Maple Shelters

Track2Realty: The answer to the question whether it is preferable to invest in a flat or in a plot of land depends on many factors, including the maturity of the investor. The investor’s overall objectives, ability to leverage, risk appetite and period of time he is able to hold on to the property before selling it again must be considered.

A young investor with limited capital should ideally purchase an apartment for capital appreciation or rental income. Land investment is a better option for mature investors who have a bigger investment horizon.

Land investment involved identifying opportunities where there is a possibility of creating value – e.g. agricultural land, which can be converted to NA / residential or commercial zone, making it possible to develop it and then lease it out or sell it. Alternatively, the investor can sell it after booking an acceptable profit when capital is required, or when sufficient value has been built up.

Land purchase is most profitable when one invests in emerging growth corridors of cities where appreciation is likely to happen over the next 3-4 years. Wherever there is existing commercial activity or the likelihood of such activity beside the existence of social infrastructure, the future demand for residential apartments will be higher.

For maximum future returns, it is important to make one’s investment while entry costs are low. Location is very important if one wishes to buy land to use in a retail or industrial setup. This is because such ventures are dependent on the immediate access to a customer bases and availability of manpower.

Wherever possible, the investor should try to find out the valuations of the land over the last five years to benchmark against past and recent land transactions in the area. Availability of other land parcels for possible purchase is an important factor to look at, and the investor must establish whether the seller is the sole or joint owner of the land. To avoid the various risks that investors can be exposed to while investing in land, it is always advisable to purchase developed plots from reputed developers.

Apart from the price of the plot, the other expenses that will have to be addressed are the registration fee, the stamp duty, the surveyor’s fee (if any) and legal fees. If one has bought agricultural land, then one may eventually need to change its land use to commercial or residential. For this, an application has to be made to the local collector’s office, along with all documents and applicable fees required by State law.