Planning to buy a plot? Go for an area likely to see economic activity

As people start moving in, the area will become habitable and capital values will also appreciate

With buyers perceiving standalone houses to be safer than apartments amid the pandemic, the demand for plots has risen, says a report from Anarock Property Consultants. The entry of leading developers into plotted developments has also provided a fillip.  

Low entry cost: A plot is a better option for entry-level buyers. “The money required for purchasing a plot is lower than for an apartment,” says Siva Krishnan, managing director, Chennai, JLL India. Those who want an independent house, but cannot afford it, buy a plot, say, on a city’s outskirts, where rates are lower so they can construct on it later. “A plot gives the buyer freedom regarding when to construct, depending on his cash flows. A standalone house can also be customised according to one’s requirements,” says Rahul Purohit, principal partner & head, India sales, Square Yards.

Delivery risk gets eliminated to a large extent in a plotted development. Once the deal is signed, the plot is usually delivered in six months to one year. In an under-construction project, delivery could take three-four years and the risk of delay is ever present.

It is the land whose value appreciates in any built-up structure. The value of a plot that lies empty for 10-15 years is likely to appreciate. The value of a built structure, on the other hand, depreciates with time. “It is easy to sell a plot 10 years later and the return on investment is likely to be sound. But if the society is not well maintained, you could find it difficult to sell an apartment as buyers are often reluctant to purchase in an old building,” says Amitraj Jain, senior vice-president, sales, BPTP.

According to the Anarock report, several developers have launched plotted developments. “Their entry has given confidence to buyers to invest in plotted developments,” says Purohit. Developers promise amenities in plotted developments like roads, power backup, gates, security, etc. With reputed players, the buyer has the confidence that these will be delivered.

Five things plot buyers must check

• Familiarise yourself with the FSI rules of your state so that you know how much you can construct on your plot
• Learn about the restrictions related to height and number of floors
• Find out if the developer has his own rules regarding construction (he may have a few to curb chaotic development)
• Make sure you have the time and energy, or the manpower, to oversee construction which will be your responsibility entirely

The monthly maintenance charge is high in a premium apartment complex. This becomes a drain on the owner’s resources if the apartment is not occupied. “The maintenance charge is usually lower in a plotted development,” says Jain.

Watch out for title risk: Title risk can be high, especially if you purchase an independent plot from a landowner. If you perceive this risk, get a property lawyer to do the necessary checks. An independent plot also carries the risk of encroachment.

A high-rise apartment complex has better security. The amount of loan you can get for purchasing an apartment is higher than for a plot.

Area must have economic activity: Plotted developments are usually available in peripheral locations. Bet on an area that will develop with time. “The area should have office complexes or IT parks coming up. Prices will then appreciate as people move in,” says Purohit. Krishnan, too, emphasises the importance of selecting an area that has economic drivers—IT-ITeS, manufacturing or industrial activity.