By Yogesh Awasthi
Real estate investing has always been a well-liked strategy for accumulating money in India. However, a fundamental question that many potential investors face is: Should one invest in flats or real estate to optimise profits? There are unique advantages and challenges associated with these routes. The relative benefits of investing in land versus apartments are examined in this article using recent data and trends.
The Case for Land Investment
According to recent studies, buying a piece of land can yield significantly higher returns than ready-to-occupy apartments. The returns from renting out land might be up to ten times higher than those from ready-to-move-in homes. This judgement is impacted by factors like proximity to city centres, potential infrastructure developments, and the availability of social facilities.
According to data, residential plots in eight major cities have increased in value by an average of 7 per cent annually since 2015, whereas apartment prices have increased by 2 per cent annually during the same time frame. One major element causing this tendency is the restricted number of plots available in large cities, which is caused by a lack of large land parcels.
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Advantages of Land Investment
High Appreciation Potential: Significant rates of appreciation have been observed in the land, particularly in developing corridors close to metropolitan regions. For example, in the next ten years, the Neral-Matheran corridor near Mumbai is predicted to yield a fivefold return on land investments.
Flexibility in Utilisation: Investors can create structures for leasing, set up vacation homes to make money, or hang onto land for long-term appreciation. This adaptability enables several sources of income.
Lower Maintenance Costs: Land is a hassle-free investment since, unlike apartments, it doesn’t need constant upkeep.
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The Case for Apartment Investment
Apartments have their own set of benefits, but land investments have a great potential for appreciation:
Rental Income: Consistent rental income from apartments can provide investors with a reliable cash flow.
Amenities and Security: Modern apartments are more appealing to prospective renters since they provide features like parking, gyms, power backup, and security services.
Ease of Financing: With so many financing alternatives accessible to purchasers, obtaining loans for apartment purchases is typically easier.
Challenges in Apartment Investment
Notwithstanding these advantages, investing in apartments has several drawbacks:
Slower Appreciation: Data shows that apartment prices have grown modestly since 2015, on an average of 2 per cent every year.
Depreciation and Maintenance: Apartments may need a lot of upkeep over time, and wear and tear may cause their value to decline.
Market Saturation: An excess of apartments in some cities might result in lower rental returns and longer vacancy times.
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Key Considerations for Investors
When choosing between investing in apartments or land, take into account the following factors:
Location: The potential for appreciation of both land and apartments can be strongly impacted by proximity to social amenities, infrastructural initiatives, and city centres.
Investment Horizon: While apartments might be a better option for people looking for immediate rental income, land investments are usually more appropriate for long-term investors hoping for significant appreciation.
Risk Tolerance: Long-term investors hoping for significant appreciation are usually better suited for land investments, whilst those looking for instant rental income can be better off with flats.
In the Indian real estate market, there are good prospects for both land and apartment investments. Land investments have shown to be more appealing to long-term investors due to its higher appreciation rates and flexibility in use. However, apartments are attractive to investors looking for quick returns because they have built-in amenities and a consistent rental income. To make wise choices that support their investing goals, investors should evaluate their financial objectives, risk tolerance, and market conditions.
(The author is the President, Strategic Initiatives at Jenika Ventures)
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