Should I Buy an Apartment or Build My Own Home?

From independent homes to apartments – there has been a paradigm shift in homebuying patterns in India. There were days when people bought a plot of land to build their home. But with population growth in the last two decades, cities expanded rapidly, which further resulted in limited land availability. And the solution came in the form of apartments. And the rest, as they say, is history!

The apartment culture has taken the Indian real estate market by storm. While today’s fast-paced Ola-Uber generation prefers apartments, there is still a section of people who desire to buy a plot and build their own home. Taking a cue from this, several developers have already started to cash on the concept of “buy a plot, and we’ll build the home for you.”
So, ever wondered what is best for you – an apartment or a plot? In this article, let’s solve this never-ending debate.

Investment potential

The cost of buying an apartment or a plot of land completely depends on the location. Buying within city limits will be a costly affair while moving towards the peripheries will be relatively low-cost.

In terms of cost, buying a plot is relatively cheaper as the overhead costs are lesser when compared to an apartment. However, in terms of availability, apartments score over plots due to space crunch in metro cities. Moreover, the majority of developers focus on building apartments; while only a handful of renowned builders offer plotted developments.

Buying a ready apartment requires you to pay a lump-sum amount or take a loan and pay EMIs over time. However, with a plot, you have the financial flexibility to begin construction depending on your finances.

Building your home demands not only money but constant monitoring of the construction process. Lack of experience here could result in substantial costs. Buying an apartment requires a fixed amount that is to be paid to the builder.

Scope of resale

Apartments are easy to sell due to constant demand. Moreover, apartments come with several amenities as well as security provisions.

In apartments, the percentage of undivided share of land is low as it is divided among all the owners. The big advantage of plots, however, is that a buyer gets to own the land and can construct a new home to reap better returns.

Appreciation lag

The return on investment (ROI) for an independent home increases over time, but there is a catch to it. While land is an appreciating asset, the value of the constructed building depreciates due to constant usage. In order to maximise the returns, one has to regularly invest in its maintenance.

Apartments, on the other hand, fetch consistent returns due to constant demand and regular maintenance by the Resident Welfare Associations (RWAs).

Safety vs privacy

An apartment society is well-guarded round-the-clock while living independently means investing in security from your own pocket. On the positive side, plot owners need not share floor space with others. They get complete privacy while living in a community.

Convenience vs flexibility

Building one’s own home requires hiring an architect, seeking approvals from local bodies, and dealing with contractors. In apartments, everything is taken care by the developer.

On the positive side, plots offer you the freedom to choose designs based on your budget. Even if you cannot afford to build a home now, you always have the opportunity to build one in the future.

Amenities

Most apartments come with amenities such as power backup, lift, and security. In addition, one also has the option for premium amenities such as clubhouse, swimming pool, and gymnasium.

Plots in gated communities have access to all the facilities and amenities within the complex, while in the other case, accessing amenities and support infrastructure becomes little difficult.

Tax sops

In case of apartments, first-time homebuyers are entitled to certain tax deductions.

For plots, the tax deduction on interest is available only from the year construction is completed. Interest accrued during the construction period can be claimed as the deduction over five years in equal installments starting from the year the construction is completed, which means tax benefits are delayed.

Holding a plot as an investment is not eligible for any tax benefit, but you can claim a deduction on the interest amount. However, if the land is vacant, it will not qualify for tax deduction.

If the plot is rented out, irrespective of whether the rental income is offered for taxation as ‘business income’ or ‘income from other sources,’ the interest paid on any loan used to buy the plot is available as the deduction. However, there will be no tax benefits for repayment of the principal of such loan.

Our verdict!

 

From the points above, it is evident that selecting a property type depends largely on three parameters – budget, time-frame, and preference. Here’s our verdict.

 

• If you are merely looking to invest for the next few years with a low budget, a plot in an upcoming location would be a good option.
• If you are looking for self-use, apartments definitely score over unless you have a plot somewhere in the city center and have gathered enough funds to build on your own.
• If you are looking for regular returns in terms of rentals, then also you may want to consider investing in an apartment.