When planning to invest in a second property, buyers are often torn between a dilemma. On the one hand is the option of purchasing a piece of land and on the other is the choice of buying an apartment.

Investments in both flats and plots come with their own set of merits and shortcomings. It is therefore imperative for buyers to determine their own set of requirements and decide to invest accordingly.

A plot of land affords the buyer the choice of building the house to his own liking. Everything can be tailored to suit his specific requirement, taste and budget. A flat on the other hand does not permit him to alter the shape and size of the construction area. Nonetheless, it scores higher than a plot in terms of security and accessibility.

The Land vs Flat Debate
Before investing, buyers should thoroughly evaluate the following criteria and then decide whether to purchase an apartment or a plot of land.

Value Appreciation: Land is a limited resource. Its value therefore appreciates much faster than that of a flat of similar dimensions in a similar duration and in a similar location.

Flexibility to Construct and Modify: A plot of land allows flexibility to the buyer to build his house as per his liking. Moreover, the owner can make sweeping structural changes to the building at any given time in the future. An apartment on the other hand offers limited ability to modify and expand.

 
The value of land appreciates faster than that of an apartment
Possession: A buyer gets immediate possession of the plot of land if it is not a part of a builder-project. However, in the case of an apartment, the buyer gains possession only once the project is complete. The downside is that most projects get delayed and buyers have to wait a long while before they can gain possession of their flat.
 
Risk: If a piece of land is in a remote location, or is unfenced or if the fencing is not strong enough, it stands in the danger of being encroached upon. Apartments on the other hand are safe from encroachment risks.

Quality of Construction: As every aspect of the construction on a plot of land is closely monitored by the home-owner, it is generally of the best quality possible within his budget. In case of apartments, developers often compromise on the quality of construction in order to control costs and meet deadlines.

 
The Financing and Tax Paradigms: Purchasing a plot of land is a challenging affair. Buyers need to be financially sound for initial investment. Though banks like HDFC Plot Loans and SBI Realty offer loans for purchase of plots, the process is very cumbersome. Besides, the associated tax benefits are subjective to completion of construction on the plot of land and are offered only for the first year. Buying a flat is easier in comparison. For one, bank loans are easily available. Moreover, the buyer can avail of a host of tax sops.

Source of Income: A plot of land does not generate any income or profit till the time it is sold. On the contrary, flats, when let, generate a handsome, fixed monthly income. Moreover, with modern tenancy laws in place, there is limited scope for litigation.

 
An apartment can generate handsome rentals as soon as it comes under possession
Convenience: Since the home-owner has to closely monitor every aspect of the construction on a piece of land, it can be quite taxing. Buying an apartment on the other hand is hassle-free. The home owner only needs to take care of the interiors once the apartment has been handed over.

 


Security: Individual homes that lie outside a gated community are prone to theft, vandalism and other dangers. They need to invest separately in security systems and guards for the protection of their property. Flats on the other hands lie within residential complexes and are quite secure.

Accessibility: If a plot is situated in a remote location, access to basic amenities might be a problem. Apartments almost always have good walk scores as most amenities lie within easy distance.

Suitability: A plot is best suited for people who can dedicate enough time to building a house on it. Apartments are ideal for people who have less time on their hands and for those who cannot endure the travails constructing a house might inevitably put them through.

The following table captures a comprehensive snapshot of the points discussed above.

 

Investment in Plot vs Flat: Benefits & Weaknesses
Investment in Plot vs Flat: Benefits & Weaknesses
Buying property is one of the most lucrative forms of investment. However to benefit from it, investors need to factor-in the pros and cons of investing in both, land and flat from their personal standpoint and then come to a decision.