Home vs. Plot – Which is a better investment?!

Buying a plot in any part of India can be challenging unless you have sound financial backing for initial investment. Banks do offer a loan for the purchase of a plot and even for construction such as SBI Realty, HDFC Plot Loans, Indian Bank Plot Loan etc. However, the associated tax benefits are subjective to whether you complete constructing a house on the plot or not, and even if you do, the benefits are offered only for the first year.

On the other hand, in case of flats, loans are easier to avail, albeit, at similar interest rates. However, flat purchase attracts a lot of tax benefits, especially for first time home buyers.

 

Which Requires More Investment?

Building one’s own house can be a challenge since one has to constantly monitor the construction activities, right from meeting with architects to ensuring raw materials are used correctly. Also, a common problem faced by most first time home builders is the tendency to stretch the budget while constructing the house, resulting in overspending. With flats, a definite rate has to be paid to the builder; and apart from the house and registration costs, the buyer only has to spend on getting the interiors done. At any price range, constructing one’s own house will be more expensive when compared to buying a flat of a similar size and dimensions; however, it gives the owner the freedom to choose the layout and design.

 

Which has Better Resale Value?

When one considers the resale value of the house, most people who are looking for an independent house prefer to buy a plot and construct their own house as opposed to buying a built house. However, with the cost of construction and land escalating, there are buyers for building independent houses too. In case of a house, the value will have a direct correlation with the amenities within the house and accessibility around it. In case of flats, the value of the property rises as the demand for flats within the colony rises. However, houses have a higher resale value than flats, primarily because the person buying the house also becomes the owner of the plot of land on which the house has been constructed.

 

Which has a Higher Rate of Return?

In case of constructing a house on a plot, while the land value appreciates, the house value depreciates due to wear and tear. Owners must pay special attention towards space planning, construction quality, and quality of amenities etc. as they are the decisive factors for valuation. One reason why the value of the house is higher than flats is because of the demand-supply differences. The supply of independent houses is lower than that of flats. Also, the owner of the house has the option to get permission for adding additional floors to the house and renting or reselling them.

 

What to Check before Buying Land?

Buying land has become a risky business in major cities due to the number of instances of fake registration papers. Hence, it is essential to check under whose name the land is registered. Further, one must look out whether the house is stuck in litigation and the seller has sole ownership of the land with no other claimants.

Documents to Be Checked Before Buying a Land
Document	What to Check?
Title Deeds	If it is in the seller’s name alone and no other person is involved If the seller has permitted access to others through this land
Tax Receipt and Bills	Property taxes paid to the Government is up-to-date with latest receipts If there are any notices of requisition relating to the property which are outstanding Water and electricity bills have been paid up-to-date
Encumbrance Certificate	Ensure that the land does not have any legal dues attached. It is issued by the sub-register office where the deed has been registered.
Pledged land	All loans for which the land has been given as pledge have been repaid Release Certificate issued by the bank
Land Measurement	Land Measure before registering the property by a recognised surveyor

It is advisable to get all the documents to be checked by a lawyer to ensure they are original and other requisite authorities too.

Apart from the paperwork, it is also essential to check for the connectivity of the house, its proximity to key places such as market, hospitals, schools, transportation etc. Also, one must ensure that the property is not isolated as many instances of robbery are being reported.

Building a home is a greater challenge than buying a flat. However, it is much more satisfying since the owner of the house is involved in every step of the construction process and everything is done as per their likes.