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Things to keep in mind before purchasing plots from developers

Apart from catering to a wider population, plotted developments generate better cash flows and provide an early exit as compared to large scale housing projects

Image Courtesy: Wikimedia Commons

Image Courtesy: Wikimedia Commons

Surendra Hiranandani

Land is an extremely valuable resource that can fetch excellent returns to investors when bought at the right place and held on for a long term. It yields rich dividends as land prices appreciate significantly once the infrastructure around the property grows, thus ensuring higher returns on investment.

Traditionally too, it has been a preferred mode of investment. People have bought plots in the growth corridors of cities but with changing lifestyles, this trend has paved the way for apartments and integrated townships.

Of late,  investors and end users have started purchasing plots from premium developers in select micro markets across India. This is due to improvement in infrastructure across metropolitan cities. This has made it easier for people to travel to peripheral areas where most the plotted developments are taking place.

Developers have also renewed their interest in this segment owing to these reasons. Apart from catering to a wider population, such projects generate better cash flows, and provide an early exit as compared to large scale housing projects. Also, in the outskirts of cities, high-rise developments take 7 to 10 years to mature as a destination and for the projects to break even. Also, with high interest costs, it is difficult to sustain such investments.


For buyers too,  prices in such projects are more affordable as compared to the residential properties in the main areas of the city. Also, buying an independent plot gives them the sovereign choice to design a living space as per their tastes and preferences. They can gradually build the house as per their financial commitments. There is also no compulsion to construct the house within a stipulated period. Meanwhile, if land prices appreciate, one can rake in the gains by selling the plot. Owing to the aforesaid reasons the demand for such projects is high across the country, a trend that is expected to gain further momentum in the near future.

Reputed developers provide a dedicated play area for children, swimming pool, gymnasium and a small clubhouse in plotted developments. In case of larger projects, there may be a provision for gardens and paved walkways. However, since plotted developments take time to get occupied, extensive facilities cannot be provided here. Also, there is an annual maintenance too which needs to be paid which goes towards maintaining the basic amenities like security, upkeep of the project, gardens, water, security etc.

As in any investment, there are certain risks associated with plots which one must consider to avoid any problems at a later date. To begin with, one must only deal with developers who have proven credentials while investing in plots. A background check on the past projects will give an idea on the execution capabilities of the developers. Also, as these are located in suburbs or peripheral areas of cities, one should invest with a horizon of 10-12 years to ensure prices appreciate. One must also remember that while investing in land, there is no immediate generation of cash flows through rental income.

Therefore, consider these factors being committing your capital into a plotted development.

The author is CMD, House of Hiranandani
Moneycontrol Contributor
first published: Apr 10, 2018 02:51 pm

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