Home Vs Plot: Which One Will Give High Returns?

Tier I cities of India are witnessing a massive demographic augmentation due to the continuous migration from Tier II, III cities and villages. This expansion has caused an urban sprawl, rise in housing demands, and a sharp surge in the price of the land. More and more suburbs are expanding as residential clusters, such as the Gunjur area of Bangalore.

Be it projects like Candeur landmark or sale of plots; the suburb has surfaced as a profitable avenue for real estate investors. In terms of residential requirement, demands for flats and ready-to-move houses have surfaced as the dominant trend.

However, investors with an extended range of planning, prefer plots over apartments because of the likely rise in the value of the land. Someone looking to invest in real estate of Bangalore or any other Tier I city, will have to weigh the possible returns of both house and plots.

-> Extent of investment

Be it a house or a flat or a plot; the all-inclusive cost of buying a property is the investment amount. The cost of a flat depends upon the location of the project, the carpet area, super built-up area, amenities, floor and brand value of the developer. The cost of a plot depends on its location and size. If the cost of building a house is taken into consideration, the investment amount of a plot can rise higher than that of a flat.

-> Resale value

In terms of the resale value of a property, plots channelize more returns than flats and ready-to-move-in houses. For ready independent houses or flats, the returns from the sale will depend mostly on the location. Depending on the connectivity, amenities and conveniences in and around the house/project, the resale of the property may generate significant returns.

-> Tax benefits

By purchasing a flat, funded by a home loan, you can get tax exemptions on the interest paid up to an amount of Rs. 2 lakh. If the house is let out, then the full interest payment can be claimed for a tax deduction. The buyer can also claim a deduction up to Rs. 1.5 lakhs on the principal amount.

The tax benefits for a house constructed on a plot are the same. However, the benefits can be availed only after the completion of the construction. Thus, tax benefits for an independently constructed house gets delayed.

-> Time lag

As an investor, if you want to hold the piece of land until its value appreciates significantly, then the waiting time is not going to have any effect on your returns. However, to earn a regular income from a plot, one has to build a house and the waiting time, in that case, gets prolonged. The waiting time of under construction apartment is also the same. However, for a ready-to-move-in house, there is no time lag between the investment and returns.

From the perspective of an investor, the decision to choose between a plot and house would necessarily depend on your financial goals and the time horizon of your investment plans. For those seeking capital gains over a long period, investing on a plot is a better option as the value of land will invariably appreciate. For those looking for regular or monthly returns, buying a house and letting it out on rent would be a fitter strategy.

To invest in the real estate sector, whether you want to put your money on an apartment or a ready-to-move-in house or a plot, you can take a home loan or a plot loan. To fund your property purchase, you can take assistance from Bajaj Finserv Homes & Loans which offers home loans up to Rs. 10 crore and also several add on like top-up loans, property search, personal assistance.
Home Vs Plot: Which One Will Give High Returns? Home Vs Plot: Which One Will Give High Returns? Reviewed by Bella Jonson on August 07, 2019 Rating: 5

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