Does it make sense to buy an apartment when you can custom-build a house and own the land it stands on?
Madhu Kalra's family sold their house in the trans-Yamuna area a decade area a decade back for R2 crore and went in for a 500 sq yard plot in DLF Phase II for R65 lakh. They built a house there for about R50 lakh. Today, if Kalra decides to sell this house, it will fetch her no less than R7.5 crore only for the land value a cool fivefold appreciation in 10 years.
You're well settled, own an apartment in Delhi NCR and are almost on the verge of closing your home loan.
Should you look at a plotted development to widen your investment portfolio? Plotted land holdings have historically produced higher returns over longer investment periods (ideally running into 10 years). While any property's brick and mortar are depreciating assets, land costs only appreciate. Though it may be unfair to draw comparisons between a plot and an apartment, an apartment generally scores in the short-term and in the longer term a plot is likely to yield higher returns than a plain vanilla apartment complex.
“Given the recent issues that have come up with land acquisitions and the likely ramifications of the Land Acquisition Bill, land acquisition prices are expected to go up (across the board). This will clearly have an impact on developer input costs and as a result, plotted developments are likely to be the first to experience an upward price revision,“ points out Anckur Srivasttava of GenReal Advisers.
The choices available Many developers in Delhi NCR having launched different residential formats are now looking seriously at the plotted asset class. Alpha G:Corp has plotted developments in their integrated townships in Karnal and Fatehabad in Haryana. “These make sense in an integrated development as the delivery risk is minimimum,“ says S K Sayal, director and CEO.
Jaypee Greens had launched plots in its Wishtown project in Noida Sector 134, called Kensington Park one-and-a-half years ago. The size of the plots varied from 150 to 500 sq yards and the price was pegged at R36000 per sq yard. “We've launched close to 700 units in this price range and another 700 at R39000 per sq yard. In Sports City along the Yamuna Expressway we have come up with 150-500 sq yard plots at R15000 per sq yard,“ says Vibhor Gupta, DGM marketing, Jaypee Greens.
According to Amit Raj Jain, senior vice president (marketing), BPTP, many people prefer to buy their own piece of land and develop it according to their choice. Indians in general have a bias no matter how big the apartment you give them, many of them would want a plot of land.
“Given the demand we launched plotted developments in two of our projects.
What someone finally buys into depends on his individual style does he want to build something on his own or is he looking at assisted living as in apartments? Now there is another variant called
independent floors that offer the best of both worlds lowrise and apartment like.“
The Logix Group has launched 1600-1800 plots in its Empire Estate, a 200-acre project along the Yamuna Expressway.
The company is offering 1001000 sq yard plots at the rate of R20,000 per sq yard.
The 3Cs group is launching a plotted development project along Yamuna Expressway in its 100 acre township called Sports Village. “We will be launching 500 plots of various sizes. These will vary from 120 sq yard to 500 sq yard and the price will be in the range of R18,000 to R20,000 per sq yard,“ says Brijesh Bhanot, senior vice president, sales and marketing, 3C Company.
“By launching plotted projects, we have given more flexibility to the customer to choose between mix of plots, villas and built-up houses as per their requirements. The demand for villas is always limited and targets a specific group, whereas demand for plots is multipurpose and caters to a wide strata of groups,“ says Anjali Agrawal, vice president marketing and client services, Vatika Group, that has launched plots in its Vatika India Next township.
A profitable investment Though many of us are sold out on flats, we can make decent profits from a plot.
Take the case of the plots sold two years ago on the Extended Golf Course Road, Gurgaon, for R30,000-R35,000 per sq yard (on a development linked payment basis). These are currently going for 60,000-65,000 per sq yard.
In some areas, contiguous land parcels of over 100 acres might become unavailable in a few years and so fewer plotted developments can be expected in the coming years. This will push up prices of plotted developments. Therefore, from a pure demand-supply perspective, scarcity of land parcels in most cities will have a direct bearing on prices of plots in the future.
The delivery risk, unlike in the case of apartment blocks, is less. Plot buyers are not at the mercy of the developer who can use any kind of material or take his own sweet time delivering the apartment. A developer will just have to provide the basic infrastructure for a plot. Land is an appreciating asset and the owner has redevelopment rights. On the other hand, in most group housing projects, apartment owners do not have any share in the underlying land. There is ambiguity over the rights that apartment owners will have in case the property has outlived its economic life and needs to be redeveloped after 30 years.
