By Mr. SANTHOSH
KUMAR, JLL India
Buyers are looking
for plots rather than flats (apartments)
Type of Investment
Property..!
Where flats are
traditionally the most sought-after type of investment property, the
attractiveness of buying plot of land for long-term and potentially higher
gains has never lost its sheen. Flats are an inflexible format of property and
this fences in the maximum value they can attain. Flats are snapped up in most
cases. But at fixed residential prices dictated by prevailing market rates.
Plot of land is a very different ballgame.
In a growth sector
with new market drivers coming in, investing in a plot of sufficient dimensions
& the right kind of authorised usage criteria for the area can become
attractive to developers from the residential, retail, office & hospitality
sectors.
As an area attains
more market drivers and begins to saturate, plots increase in value manifold
and can be sold on a seller's, not a buyer's market.
Also, plot of land is
cheap in most cases & represents a very good capital investment.
Number of
Legal Requirements..!
However, investing in
plot of land is not as simple as it may appear. To begin with, there might be
(and usually are) any number of legal requirements to meet and procedures to
follow before a piece of plot of land becomes a marketable item.
Many buyers are aware
of the difference between the Agricultural & Non-Agricultural categories –
one can not put in a development of any magnitude on agricultural land.
However, even if the land is clearly Non-Agricultural, one still needs
clearance from the local authorities to build on it.
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| Santhosh Kumar, JLL India |
Furthermore, one
should not purchase plot of land without any idea of whether it is included in
some other developmental plan.
For instance, the
town planning board may have scheduled a highway to run through it, or /
allocated it to the building of some Government structure. If this is the case,
one may own a piece of plot of land and still have no right to do anything with
it – including sell it.
In the case of
highway construction or / electrification, the owner may eventually wind up
with a high-tension cable array perched in the middle of the plot, or / a Super Expressway running through it. There
is no getting around the Government’s prerogative of Eminent Domain.
Building
Permit..!
This is a very real
risk when we consider plot of land purchase in one of the cheaper rural areas
which are constantly being hawked on the real estate market. Anyone hoping to
develop land will, in any case, require a building permit.
A plot of land must
have a clear title and be demarcated properly. Assuming that it has already
been sufficiently developed to make it marketable, it still needs to be
properly protected from encroachment.
Plots gain value only
over periods of time - if left unattended, other developments usually encroach
on it and this raises legal problems that make the plot unmarketable for the
duration of the legal tussle over it.
Furthermore, no kind
of property development involving even a minimal degree of inhabitation is
feasible without a basic septic tank & drainage system.
Ground
Water..!
In other words, what
lies underground is as important as what stands above it. If the plot is
unsuitable for digging deep enough - unstable or / extremely rocky soil could
be possible reasons - one could be in deep trouble while trying to sell it.
In fact, geologically
unstable ground would mean that it can support no structure at all.
The absence of
sufficient ground water would also be a major drawback, especially in a resale
scenario. It is a serious mistake to rely on municipal water supply alone,
since this can be pretty sporadic in rural locations. Availability of
electricity is another important consideration.
Many buyers are under
the mistaken assumption that it is not necessary to engage the services of a
real estate consultant in the case of land or plot purchase.
The fact is, only an
expert can foresee all the complications that can arise with any kind of
property, be it 'raw' or developed. Many sellers of developed plots have taken
steps to avoid such problems for their customers, but one may still wind up
with a 'dead duck' property if one buys it without knowledgeable guidance, or
from an unknown property dealer.
About the author...!
Mr. Santhosh Kumar is
CEO – Operations at JLL India
Ph: +91 124 460 5000
Email:
santhosh.kumar@ap.jll.com
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