The sole objective of any investment is to achieve financial independence & security. At the same time the sole purpose of investing is to ensure growth & good returns & help in taking care of our post-retirement necessities.

In this age of advanced & matured financial markets, we have multiple choices to choose from to fulfil our financial goals. Prominent being endowment-linked insurance plans, equity-linked investment plans, mutual funds, fixed deposits, gold, equities & Real Estate. We will focus on the real estate as a class of investment in this article.

Real Estate itself has many sub-classes like plots, residential apartments, commercial properties, REITs (Real Estate Investment Trust) etc.

We will discuss the benefits of investment in plots in this article to help readers understand the nuances of investing in the right asset to drive maximum returns.

Plots are generally purchased keeping in mind the following objectives

• Short-term Investment
• Invest for medium-term & then construct residence for self-use or earning rentals
• Invest for long-term & exit at right price

Short-term investment:

These investments are made with sole objective of maximizing returns in 1 to 3 years of asset age. Typically, these class of investors invest at the pre-development phase & exit/sell the property when it is ready for possession.

Medium-Term Investment:

These investments are made with a medium outlook, say 3 to 7 years. These investments are typically done in emerging growth corridors on the peripheral or outside the city limits with a belief that the neighbourhood will economically & socially develop, which will in turn lead to greater capital appreciation

Long-term Investment

These investments are made with objective of creating large corpus in a period of 10 to 15 years as a result of compounding capital appreciation during this period. These investments are typically made by investors who have disposable incomes or have least impact on their savings or the rate of capital appreciation will outpace the cost of funds sourced to make the investment.

Now let us look at the major benefits of investing in plots:

1. Land is a Tangible Asset

Investment in land provides the most secured form of investment as it is backed by a tangible real estate asset unlike the equity or mutual funds. It is proven historically that land value keeps appreciating – whether it is below or inflation or above inflation. Hence, it proves to be one of the most beneficial options of investment.

2. Initial Investment Is Lower

One of the biggest benefit of investment in plots is that it costs less to invest compared to other class of real estate. It always gives the benefit of buying the plot with it is cheaper & hold it till you have enough resources to build your home or sell it when the market rates suit your investment/returns goals.

3. Lower cost of ownership & maintenance

Plots needs least maintenance compared to other real estate assets like apartments or commercial properties. Even the property tax that is levied every year is minimal compared to other asset classes. In very rare cases, the builder/developer may charge minimal plot cleaning charges to the purchaser. With RERA, the owners’ associations have also started to actively participate in the maintenance of the plots by themselves or through appointed housekeeping agencies.

4. No Delay in Possession

One of the most important benefits of investing in plots is that the development period required for plotted development is very less compared to, say, flats or apartments, which typically spread over years. In normal conditions, a 200-plotted development project can be developed in one year. Land does not require any construction of buildings. Therefore, the developers can handover the plots to the buyers immediately after completing the plot development works.

5. More Flexible Investment Option

Investors have plenty of payments options available. Developers offer payment plan that are flexible & extend over the complete period of development. Most common investment plans offered are:

1. 100% down payment/advance payment scheme wherein the investor pays the whole price consideration in advance in lieu of good discounts in pricing.
2. Development linked/Instalment payment schemes wherein the investor makes a certain down payment & keeps paying the developer as & when a certain development milestone is achieved.
3. Deferred payment schemes are offered to investors who wish to buy plot through bank loan. In this scheme, the buyer makes a certain amount of investment as down payment & rest is paid to developer once he or she completes the development & obtains Completion Certificate (C.C.)
4. Easy to ReSell

As the asset is a vacant land without any permanent structures on it, it is comparatively easy to sell. A building having permanent structure is hard to be demolished & reconstructed. So, it becomes much easier to sell the land and gain an increased value of the land.

From the above, we can conclude that investment in a vacant plot offers hassle-free investment options compared to built-up assets like flats, apartments, commercial offices etc. Also, land can be sold without any hassle of shifting any belongings since land is an empty property, and can be sold off instantly when the prices are up. Therefore, there are immense benefits of investing in plots and one can certainly get convinced with all the details given above.

But it is equally important to note that investment in plots needs a very deep due diligence in terms of land titles, statutory approvals, post-development division of property rights, completion certificate, developer track record etc. It is always advisable to engage a attorney/lawyer to conduct required diligence before you go ahead & invest your most preferred plot.