“Buy land, they’re not making it anymore,” these golden words by Mark Twain still holds true with property values inching to a new high every year.
Since time immemorial, the land has been a lucrative investment option for Indians. Be it the appreciation potential or the flexibility quotient, it is one investment that yields good returns if invested with care.
However, post the surgical strike against black money in late 2016, the supply of and demand for plots recorded a major dip. As land transactions involve a larger cash component, builders shied away from launching plotted developments.
But now with the dust of demonetisation settling down, plots have once again made a comeback in the realty scape in South India.
Bangalore records maximum growth in plots
As per our research, plots had the clear majority in Bangalore in Q1 2018 as against the same period in 2017. Of the total units that entered the market in this quarter, a whopping 64% were plotted, followed by apartments with 34%.
Chennai and Hyderabad also recorded a supply of 22 and 31% respectively.
“Plots are easier to sell and has much less approval cost or any other initial investments. Developers can exit out of the land, especially land parcels in the outskirts of the city and in locations that are less preferred by apartment buyers,” explains Naveen Nandwani, Managing Director of JLL (Bangalore and Kochi).
Interestingly, leading names like the House of Hiranandani, SARE Homes, etc. are venturing into this property segment. Stringent regulations in place have forced fly-by developers to exit the market, which has created a huge opportunity for established developers. Also, for cash-starved developers, plots are one of the easiest ways to collect funds.
Change in norms
Another development that has resulted in the increased supply of plots in the city is the change in regulation by the Bangalore Development Authority (BDA).
Earlier, developers could sell 40% of the total units on the first day, and about 30% units could only be sold after the trunk infrastructure was in place. The remaining could be sold when the full work was completed. Last year, the BDA announced that the builder could only sell when the entire physical infrastructure was in place. This rule eliminated the smaller unorganised players from the market.
Greater flexibility
“Investing in plots allow buyers to build their homes according to their choice and design, having the flexibility to build it as per their needs and requirements,” says Vineet Relia, Managing Director of SARE Homes.
Reiterating the same, Surendra Hiranandani, Chairman and Managing Director of House of Hiranandani explains, “Plots give you the freedom to build the house as per your financial commitments. There is no compulsion to construct within a stipulated period.”
Improved infrastructure
Today, improvements in infrastructure have made it easier for people to travel to peripheral areas where the majority of these developments are taking place.
Surendra further explains that in the outskirts of the city, “High-rise developments take five to seven years to mature as a destination and for the project to break-even. With high-interest costs, it is unviable to sustain such an investment, which is leading to a rise in plotted developments.
But, the viability of plotted developments holds true only in case of peripheral areas of the city as the full floor space index (FSI) potential cannot be utilised.”
House of Hiranandani recently launched residential plots in Thaiyur, on the Old Mahabalipuram Road (OMR) in Chennai. This launch followed a similar project in Shankarpally, Hyderabad.
Higher appreciation potential
Naveen says that investing in plots is an alternate medium to long-term investment.
Still confused about which property type to invest in? Read our post on apartments vs plots to make an informed decision.