Investing in Plot Vs Flat – Pros and Cons

investing in land vs plot comparisonInvesting in plot or flat enclose their pros and cons. While purchasing a piece of land offers you the freedom to construct a house based on personal needs and limitations, buying a pre-designed apartment does not leave much scope to modify the size and appearance of the structure area. We delve into some factors of disagreement on the decision to either invest in plot or land. These factors will help you in forming a clear-cut opinion about the same.

Pros and cons for investing in land:

We first assess investment in land on the following factors:

  • Cost appreciation: Land is believed to appreciate quickly as the amount of available space becomes a limitation in cities. Convenience of building a house based on future needs boosts the price of property over the time.
  • Price: The price of a plot varies with location, size and available space.
  • Bank Loan: Usually, banks do not offer loans for purchasing plots and thus, the buyer is left with little options to improve his financial situation for buying land. Though a few Cooperative banks do have such provisions but they provide a limited tenure and loan-to-cost has an upper limit of 60 per cent as a rule.
  • Risks involved: Land can attract lawsuits easily and involves prolonged legal battles before the buyer can finally breathe a sigh of relief.
  • Source of income: A plot cannot be considered as a good income source as income from rent is very little. It might become difficult to recover the plot in case the renter drives the property into a lawsuit.
  • Future circumstances: Since a plot always remains in demand, the cost of the same usually appreciates right away because of zero depreciation.

Pros and cons for investing in a flat:

Let us weigh up flat acquisition on same factors.

  • Cost Appreciation: A flat comprises a narrow lifetime and thus, its cost has a deteriorating effect. After some years, there is not much growth in the value due to lack of convenience in modification, use and expansion in comparison to the cost of land.
  • Price: The price of an apartment varies with location, facilities, size, accessibility, blueprint and realtor’s goodwill.
  • Bank Loan: Usually, banks are quite happy to provide a loan for purchasing a flat.
  • Risks involved: Delayed possession is a regular problem with flat purchase. The realtor might compromise the quality of the flat to meet the target and control the cost, accordingly the life span of flats is diminished.
  • Source of Income: Flats can serve as a good source of rental income and the chance to land into a lawsuit is very less, thanks to the clear tenant laws and rent deeds.
  • Future circumstances: The growth rate is hampered by depreciation on construction, therefore the cost of flat increases at a slower rate in comparison to land.

Plot Vs Flat

Undoubtedly, purchasing a plot assures you of solid returns, but it generally requires payment in full and you have little chance of leveraging the fund, therefore, by and large, the return is restricted to a limit. Conversely, flats are easier to buy and you may take leverage to sponsor its acquisition, and returns are excellent too. However, the investor has to bear the interest burden on a leveraged financial situation when economy is in a slow-down phase. This sort of situation is hardly a thing to worry for a plot holder.

To decide which investment is best investment for you, first think about your requirements. If you want the property for your personal use, then investing in a plot offers flexibility of use and substantial cost appreciation in the coming time. But if you wish to resell the estate after some years, then buying a flat is more profitable. If you do not keep the flat for long, it will eliminate the depreciation part. For senior citizens or busy professionals who are unable to devote enough time to sustain the property, it is prudent to invest in a flat.