4 Helpful Tips For Doing Invest In Land Or House
Updated: Mar 27, 2019
Having to invest your money in real estate is not an easy task. You not only need to seek a safe avenue, you also need to make a decision on what to buy which could either be a built up house, an apartment or a plot. This decision is based on your needs, lifestyle, preferences as well as other important aspects like finances, tax and so forth.
While investing in land or plots means you get to build a house according to your requirements and approved layout, buying a house means there is no freedom to change the construction layout and size. You get to be responsible for security and construction of the built-up house in a plotted development, whereas, in an apartment, you have the benefits of location, security, and accessibility.
Investing in either a plot of land or house has its own benefits and risks. And there are several factors to consider which can help in making the appropriate decision. So which one is a better option- investing in plots or apartment?
#1: Value Appreciation
Looking at investment from the cost and price appreciation perspective, investing in the land seems to be the better option. This is so because land prices are bound to appreciate if the basic infrastructure around the property grows. Whereas the appreciation of the value of a house also depends upon the demand for such property in any location.
However, even land runs the risk of depreciation in case the basic infrastructure and township does not grow or fails to materialize completely.
#2: Taxation & Financing
When it comes to the cost involved in purchasing a vacant land, it is on the high side as it incurs the extra cost of constructing the house on it. It can also be difficult getting the land financed in comparison to financing an apartment. And also, when it comes to claiming tax deductions, benefits are allowed only if the loan is availed for buying or constructing a house. The empty plot of land offers no tax benefits. Sale proceeds of a vacant land incur higher tax.
#3: Income Generation
Investing in an apartment or rental property means you get to earn regular income. An apartment can be rented out whenever you want to fetch you some income, which is not possible in the case of plots. You cannot get income from land until a construction has been made on it.
Getting a loan as finance to buy a land or plot is based on certain conditions. You can only get a loan for buying a residential plot if such land has been approved by the local authority which amounts to 80% and in the case of resale land, only about 50% loan-to-value is allowed. In the case of a home loan, a buyer can get nearly 85% funding. Also, the maximum loan tenure for a land loan is 15 years while for a home loan, it can go up to 30 years.
Deciding which of these options is best for you should be done after proper analysis of your financial abilities, needs, and liabilities. If you are looking to invest your funds for just a few years until you are ready to invest in a flat, then a plot of land in a location which would see appreciation in the future would be a good idea. However, if you are looking for regular income, investing in a flat would be a good idea.