Advantages and Drawbacks of Plot Investment

Plot investment has always been considered a good investment option. A plot of land is an asset which can be sold or shared for future development gains. The demand for plots is always increasing and there is limited supply so investing in plots is a profitable option. The consistent increase in land prices and the return on investment offered by real estate regularly yields handsome returns. However, like any other investment option, plot investment has its advantages and drawbacks. Here is a look at some of the advantages and drawbacks of investing in plots.

Advantages of Plot Investment

  • Plots are a tangible asset, and because of constant demand and short supply, you can be sure of gaining profits.
  • If you are planning to buy a plot, land value is expected to rise quickly depending on the location. Plots are believed to appreciate depending on the location and infrastructure development in that area.
  • Plots generally have better resale value as compared to residential properties, due to no depreciation. People prefer to buy a plot and construct their own homes so that they can build their homes according to their tastes and style.
  • The cost of plots is comparatively lower than residential properties and hence more affordable. Potential buyers with a lower budget can also consider investing in remote and developing areas where there are chances of development in the future.
  • Property tax is less on plots as compared to residential properties.
  • Plots require less property maintenance than residential properties, so you save on maintenance costs.
  • Plots are available in all sizes and different locations so you can invest in a plot and, when you choose, construct your own home. The value of the plot can be different depending on its size, location, and included amenities.
  • Individuals can buy a plot now and build a house later when they have accumulated enough funds for construction.

Drawbacks of Plot Investment

  • The most notable drawback of a plot is that it does not generate immediate cash flow. So if you are looking for immediate cash flow like rent, then you should not invest in a plot.
  • There will be liquidity issues when you invest in plots as buyers are generally not immediately available.
  • Individuals can avail loans from banks and financial institutions for the purchase of a plot, but there will be no tax benefit available on it as is applicable in case of buying an apartment or villa.
  • Plots are more susceptible to litigation than other residential properties. Make sure you have secured your plot and checked the property documents before purchasing.
  • You must confirm that zoning may not put your plot in a commercial zone since it was purchased for building a home.
  • Surveying of plots is expensive, as you have to determine that it is viable for further construction and not in a flood zone or any other issues. To avoid such hassles, purchasing a plot from reputed developers is the best option.
Last updated on October 1, 2020

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