Buy from rightful owner, don't trip up on titles when investing in a plot

With prices on the upswing, a judiciously chosen plot can yield higher return than an apartment

Land prices have risen 20 to 44 per cent on average between 2019 and 2022 across tier-1 cities, according to ANAROCK Group, a real estate consultancy. A recent report from Dolat Capital says the price increase has been particularly sharp in Gurgaon and Hyderabad, with prices shooting up by more than 200 per cent in some areas since pre-Covid-19 times.

Rising demand

Since the pandemic, many residents of metros want the greater seclusion that an independent house can provide. This has led to an increase in demand for plots. “Several plotted development projects have been launched across cities in the past two-three years,” says Anuj Puri, chairman, ANAROCK Group. Demand for farm houses and second homes has also gone up.

Demand within the residential sector has been on the upswing over the past two years. “Demand and customer sentiment have remained strong despite economic headwinds and higher interest rates. This has encouraged developers to launch new projects for which land is the basic raw material,” says Subhankar Mitra, managing director, advisory services, Colliers India.

Infrastructure development is another key driver. “Demand has gone up in areas situated around upcoming projects. For example, ever since the construction of the Jewar International Airport began, there has been a spurt in real estate activity in and around the airport, leading to an increase in land prices,” says Puri. He adds that land prices in areas under the Yamuna Expressway Industrial Development Authority (YEIDA) have risen by 35-45 per cent or more over the past two years because of the airport and other developments.

According to Mitra, the development of metros and expressways in several cities has brought far-flung areas closer to the centre, leading to an increase in demand for plots in those areas.

Price escalation is also being caused by limited availability. “Noida, for instance, has no land available in key markets,” says Puri.

Higher returns

Land is usually the preferred option for investment purposes. “In most cases, plots offer higher return on investment than apartments,” says Puri.

Beware title risk

Make sure that the person you are buying the plot from is the rightful owner. “The chain of titles must be clear,” says Kirti Dua, partner, ANG Partners, Advocates & Solicitors. Contact a property lawyer who will get the title check done from the registrar’s office.

Don’t allow yourself to get tripped up by regulations. “Land is a state subject. Each state has its own rules regarding who can buy land and of what type. Moreover, multiple authorities regulate land usage and can have an impact on its potential,” says Mitra.

Plots are also subject to security issues. “Unused land can be encroached.  Even if you are the legal owner, you may have to fight a court case, which could be tedious and time-consuming,” says Puri.

A standalone plot purchased in a far corner of the city may also lack infrastructure support. Both, for security and infrastructure-related reasons, buying a plot within a builder’s project is safer.

While loans to buy a plot are available, a few conditions need to be fulfilled. “The plot must be within municipal limits. The loan to value (LTV) ratio is lower in a plot loan, so be prepared to shell out 20-30 per cent of the price. And to enjoy tax deduction, you will have to convert the plot loan into a home loan once construction is over, by submitting the completion certificate and the occupancy certificate,” says Adhil Shetty, chief executive officer, BankBazaar.com.

Micromarkets that have given highest appreciation

City	Micromarket	Avg. plot prices (2019) in Rs/sq. ft.	Avg. plot prices (2022) Rs/sq. ft.	% change ( 2019 to 2022)
Bengaluru	Devanahalli	2,450	3,150	29
	Attibele	1,700	2,200	29
	Doddaballapur Road	2,000	2,400	20
Chennai	Poonamallee	2,700	3,350	24
	Tambaram	2,650	3,300	25
	Navallur	2,500	3,050	22
NCR	Neharpar, Faridabad	3,500	4,550	30
	Greater Noida West	3,300	4,600	39
	Yamuna Expressway	1,600	2,300	44
Hyderabad	Medchal	2,100	2,600	24
	Adibatla	1,650	2,100	27
	Ghatkesar	1,350	1,800	33
Kolkata	Howrah	980	1,200	22
	Barasat-Madhyamgram	1,100	1,350	23
	Garia	1,450	1,900	31
Pune	Hinjawadi	1,700	2,200	29
	Chakan	1,020	1,300	27
	Manjri	1,700	2,100	24
MMR	Shahapur	490	700	43
	Boisar	1100	1400	27
	Neral	600	800	33

Source: ANAROCK Research