Residential plots are seeing significant traction among buyers, as potential home owners are increasingly looking at staying in individual houses following the COVID-19 pandemic. As per data with Square Yards research, the demand for plotted developments saw a slow and steady rise during the year 2020. While demand for plots either inched up marginally or remained unchanged during the first three quarters, a significant rise of close to 50 percent was recorded during the Oct-Dec 2020 quarter vis-vis the Jul-Sep 2020 period.
The YoY change in demand also showed a similar growth trajectory. This phenomenon has been common across the country and not just limited to specific cities or regions. Over 65 percent of the inventory or over 100 plots of the Phase II of ‘Century Greens,’ a ‘premium plotted development’ of Century Real Estate in Bengaluru, was sold out in the first ten days during the pre-launch itself in February 2021. Incidentally, the Phase I of the project, which was rolled out in September 2018, was sold three months after the launch. Of the 381 plots developed by ‘Shriram Earth,’ a plotted development project located in Mysore, the company claims to have only a few left.
With interest for plots seeing an increase, more so after COVID-19, large organised property developers have also entered the ‘plotted development’ space. Leading property developers such as Godrej Properties, Puravankara developers, Sobha developers, Mahindra Lifespaces, Century and Shriram Properties have forayed into the space recently.
What are the reasons for the increase in demand for plotted development and what are the factors you should keep in mind before opting for such projects? Here are detailed insights.
Why are plots in demand?
Experts believe that plots were always in demand. However, COVID-19 gave a push to it further. “With the onset of COVID-19, plotted developments have become a sought-after choice for real estate investors and home-buyers alike due to factors such as land being an appreciating asset class, and a growing demand for open spaces and low-density projects,” says Ravindra Pai, managing director, Century Real Estate.
Mani Rangarajan, Group COO, Housing.com, Makaan.com & PropTiger.com says, “Plots have always been buyers' first preference in India; following the COVID-19 pandemic, demand has increased and is expected to remain high.” The key explanation for plotted development's popularity is the versatility it provides, as well as the immediate high appreciation it promises, as land value never decreases.”
“As a result of the increased demand, reputed developers are designing plotted development projects that offer owners a comfortable lifestyle. The demand is largely due to the intrinsic existence of its ability to assist owners in adhering to the modern living norms that have recently taken place. If built by reputed developers, these colonies provide the best of amenities in addition to the normal versatility that such abodes provide. The opportunity for high returns in areas where infrastructure is being developed also makes buyers jump at the chance,” says Mani Rangarajan, Group COO, Housing.com, Makaan.com & PropTiger.com.
Kanika Gupta Shori, Founder and COO of Square Yards, echoes the thought and believes that plots are even a better proposition compared to a house or apartments when it comes to investment in real estate. “As there are no depreciating elements involved in a plotted development, one gets the full benefit of the land value appreciation. On the other hand, age can have a negative impact on the value of apartments or floors which tend to get dilapidated over a prolonged period of time, if not maintained well,” says Shori.
“From an investment standpoint, plotted developments offer potentially higher return on investment than apartments or floors. This is attributed to the lower entry size in terms of capital invested and faster rate of appreciation that plots witness,” adds Shori
Points to watch for before buying plots
Doing proper due diligence is a must while buying a property. The importance of due diligence is even higher when it comes to buying a plot. “Higher level of due diligence is required while investing in a plot as compared to apartments. Paperwork is critical while buying a plot. Documents you need to check for include the title deed, release certificate, encumbrance certificate, property tax receipts and local approvals,” says Shori.
There are numerous instances of fraud and dubious transactions when it comes to real estate, especially plots. “If you want to avoid headaches later, go through all the documents. You must get a valid title if you wish undisputed legal ownership of land for sale. Always look for clear deeds, whether it's an agricultural, a residential or commercial investment plot,” says Rangarajan.
He adds, “When purchasing a resale property, a release certificate is required; check to see if the bank has given a release certificate; that is, if any outstanding loans on the property have been settled. The encumbrance certificate is another document to add to the list; it guarantees that the plot is not encumbered by any legal debt. It's a good idea to ask the seller for past tax receipts.”
Typically in the case of plots, there is lack of clarity when it comes to who has possession of the plot. “Moreover, as far as plots are concerned, there is always a risk of illegal encroachment which may lead to unwanted legal issues. Also, the risk of government acquisition cannot be negated while investing in a plot,” says Shori.
Also, before you buy a plot, it is very important to check the land use status of the plot you are buying. “You must be sure of the purpose for which the investment is being made. For instance, if you buy a plot for residential purposes, ensure that all approvals are in place; if you want to utilize it for commercial purposes, check for the conversion norms,” Shori.
Risks are low when you buy plots through an established developer in gated community. Large developers also offer a lot of common amenities such as designated parks, club house, convenience store, play area, swimming pool and so on. However, if you buy a plot from an individual or small plot developer, take utmost care.