How are prices of plots determined?

Sulekha.com

It is a known fact that land market value keeps on appreciating, and that has always been a plus point for investors. Even though people are interested in buying flats, investing in land will give potentially higher returns to the investor in the long run. Buying land can be a rewarding experience, particularly in a city that is struggling for space and where the real estate value is sky-rocketing. Although the culture of buying apartments has spread to cities like Bangalore, Chennai, Delhi, Mumbai, Hyderabad, Pune and Kolkata, still some people are interested in buying plots and look for plots for sale to create their dream house. When purchasing land, it is very important to know the factors that decide the price of plots. Let’s take a look at them: Location This is the first and foremost important factor which determines the price of land. One has to check whether the land is near a main road or any other important landmark. The closer the land to such population centres, the higher the value. The most desirable location is where one can find thick population and good development, resulting in higher prices. Land buyers generally don’t opt for land in a thinly-populated area, even if it is better. Use of land Depending upon the use of land, the land value can drastically increase. If the land is vacant for some time and then it is utilized to build an institution, office space or for commercial purpose, it enhances the value of the land. In such cases, the owners of the land either benefit or suffer from the externally-forced factor by which they are bound even against their will. For example, Bangalore is a well-known IT hub; the plots in Bangalore are in demand, even though they are highly-priced. Amenities and facilities The cost of the land or plot changes if there are any infrastructure facilities developed by any urban local bodies or urban development authorities. The facilities can be anything like roads, communication, transport, water supply, electricity, power, sanitation, street lights, highways, etc. Condition Fertile agricultural land is worth more than worn-out land. Similarly, forest land will fetch more value than clear-cut forest. It clearly states that land that has superior appeal will have higher value than plots with no particular features.
 
Rate of interest Generally, the rate of interest in the banking system or financial institutions tends to affect the plot price. It is an inverse relationship; that is, if there is a decline in the rate of interest by the banks, it results in enhancement of investment in real estate which in turn results in the increase of plot or land prices, and vice-versa. Surroundings The term means those things that border the plot that have a vital effect on its value. The land which is surrounded by lavish greenery will definitely have a high price, even if the rivers and the mountains are not part of the property. However, the lands or plots near industrial estates will go for a low price, even if the property itself is good.
 
Speculation Speculation also affects the land value. Generally, when the demand is higher than the supply, this gives space for speculation. For instance, any urban area that has a rapid development and population growth results in migratory movement of people from rural areas to the cities. Therefore creating demand for land and to ever rising price of land. Floor area ratio or floor space index The floor area ratio is often restricted by the zoning code and may have an imperative influence on the land value. It is used as a measure the size of the piece of land on which the building is built. If the planning authority increases the floor area ratio, then the market value of the land or plot doubles. To be precise, this ratio controls the land value. The land owners have no contribution to it, but they gain benefit if the floor area ratio increases. Development of the service sector The quick growth of Information Technology (IT), Information Technology Enabled Services (ITES), Business Process Outsourcing (BPO) and other service industries are also the reason for increasing land value. The multinational companies require lot of space in the urban area to setup their operations. These companies are willing to purchase the property sites at higher value as their requirement is of utmost importance. This results in increase in the price of land. For example, properties in Hyderabad are in huge demand as it is one of the important zones for multinational companies.