Property always appreciates in value under any prevailing market condition. However, the appreciation of value depends primarily on the location of the apartment or plot of land, and the availability of good infrastructure and basic facilities in the vicinity.
Choice of Location
While investing in a plot of land in the city, the choice of location will depend on the buyer’s various personal requirements. The choice of whether it will be a long-term investment or for a short tenure where the buyer wants to construct a house within say two years of purchase of the land, depends again on the buyer’s preference.
Most of the time, the choice of location of the site depends on the rate of appreciation prevailing in the area at the time of purchase or what it could be worth as an investment with future appreciation. The choice of location while buying a plot of land for a house rests on the buyer’s area of employment and the commuting required, good infrastructure connectivity, education and healthcare facilities for the family, and other social infrastructure.
“Growth drivers for residential property are proximity to metro rail, malls, infrastructure corridor, townships, IT belts, improved connectivity, large land parcels, townships, international airport, and schools and colleges,” says Nitin R Jajoo, principal, L J Hooker reality firm. “As long as there are good transportation facilities and basic amenities, people are willing to invest,” he adds.
For resale of the plot of land, these factors and facilities will add up to fetch a higher value. The coming up of various large infrastructure projects in and around the city will result in the availability of large tracts of land. This, in turn, will lead to a spurt in more people opting for plots of land here as a favourable investment choice. This will further result in appreciation of the value of land, better connectivity and improved infrastructure.
Potential Returns
Real estate experts advise buying land on the outskirts for appreciation rather than in prime residential areas. Buying land on the outskirts gives room for more price appreciation as the buyer gets the property at a relatively lesser price. In the case of properties in prime residential areas, the values are very high and the returns on the investment might not be in the same growth proportion as in the case of outskirts.
“Between 2004 and 2007, the cost of a regular site, approved and with clear titles, purchased in the city of Bangalore, saw an appreciation between 75 percent and 150 percent in a matter of 12 months. Today, any investor wanting to buy legally approved land will have to go to the outskirts, about 45 km away from the location of the first purchase, if he wants the same appreciation.” He advises caution while buying land beyond a 45 km radius on the outskirts.
Finance and Legal Aspects
Balaji also cautions purchasers of plots to cross-check for clear titles and legal approvals on land deals. All plots of land which are planned and demarcated as layouts should be checked for statutory approvals from the authorised civic agencies concerned with layout approvals. Very often, one plot of land could have more than one owner. When it comes to acquiring finance for the purchase of plots, it is not as easy as getting 90 percent loan amount on a residential apartment. While banks have tie-ups with developers for finance schemes, they are not very bullish on releasing more than 60 percent of cost.
“Banks are not ready to fund purchase of land and may only release 60 percent on the guidance value and not on the market value”. “The investor needs to have enough cash liquidity to seal the deal,” he adds.
Source: The Times of India, Chennai
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