Plot vs. Flat: Real Estate Showdown – Who Will Win the Investment Battle?
- Gaurav Gupta
- Nov 3, 2023
- 3 min read
Investing your hard-earned money in real estate is no small decision. It involves more than just securing a safe avenue; you must also determine what kind of property to invest in. The choice often boils down to the following options: a plot, a flat (apartment), or a built-up house. Making the right decision depends on your needs, lifestyle preferences, as well as practical considerations such as taxation and bank loans.
In this blog, we'll take an in-depth look at the age-old debate: plot vs. flat. Which one makes for a better investment choice? To answer this, we will compare these two options across several critical aspects.
Plot vs. Flat: A Tabular Comparison
Before we dive into the nitty-gritty, let's begin with a quick plot vs. flat tabular comparison. It will help you grasp the key differences at a glance.
Basis of Differentiation | Plot | Flat |
Cost | It is quite expensive to purchase a plot and then build a house (Depending on location). | Compared to a plot, a flat can be owned at all price points depending on locality, size and accessibility. |
Flexibility | With a plot, you enjoy the flexibility to construct a structure tailored to your tastes and preferences. | Flats have limited scope for modifications or expansions since the structure is pre-built. |
Rate of Appreciation | Plots tend to have better value appreciation due to the limited supply of land. | Flats can deteriorate over time, affecting their value. |
Loan | Generally, it is difficult to get a home loan to buy a raw plot. However, you can get a loan for a built-up house or for construction. | Financial assistance for purchasing a flat is often readily available. |
Cash Flows | Rental income from a plot becomes possible only after a structure is built on it. | Flats can generate rental income without additional construction. |
Tax Benefits | Tax benefits associated with a plot are realized after a property is constructed on the land. | Flats offer various tax benefits, including those related to housing loan interest and principal repayments. |
Risks | Plots in an undeveloped or unguarded place face the risk of encroachment. | You can easily lock your apartment. There are no encroachment risks. |
Residential Plot vs. Residential Flat: An In-Depth Comparison
In the ever-evolving realm of real estate, one question looms large for prospective buyers: is it better to invest in a plot or a flat (apartment)? Each option has its unique set of advantages and considerations, and choosing between them is no small feat. Let's delve deeper into this dilemma.
Effort and Responsibility: Plot vs. Flat
For Plots:
Buying a plot means you have the flexibility to design and construct your dream home from scratch. However, this also implies a significant responsibility.
You'll need to hire an architect or contractor and oversee the construction process.
Managing finances, dealing with local authorities and contractors, and taking care of numerous details become part of the plot ownership package.
For Flats:
In contrast, purchasing an apartment alleviates many of these concerns. The developer is responsible for constructing the building.
You don't need to worry about the construction process; your role is primarily related to furnishing your new space.
Most flats come with basic amenities like power backup, water supply, maintenance, and security. Some even offer additional amenities like clubhouses and swimming pools.
Delivery Time: Plot vs. Flat
While flats may require several months or even years for possession, plots are typically ready for possession sooner. If your chosen plot is part of a larger township, you may gain possession even faster than a flat.
Returns and Appreciation: Plot vs. Flat
Plots tend to appreciate more rapidly than flats. This is primarily due to the limited supply of land.
The age of the plot doesn't significantly affect its investment value. Appreciation depends on factors like location and proximity to key infrastructure projects.
Plots are attractive to investors because they are relatively easy to develop, resulting in a larger number of potential buyers.
Income Generation: Plot vs. Flat
If you intend to earn a regular rental income, a built-up flat is your best bet. Flats can be rented out to generate income.
Plots offer no income until you construct a building on them.
Tax Considerations: Plot vs. Flat
Tax treatment for plots and flats differs significantly.
Home loans taken to purchase apartments or builder's floors can provide tax benefits on the monthly loan repayment, allowing you to save on taxes.
For plots, tax deductions on interest are only allowed after construction is complete.
Financing: Plot vs. Flat
Financing a plot or land purchase is possible, but it comes with specific conditions.
To obtain a loan for a residential plot, the land must be approved by the local authority. Loan-to-value (LTV) ratios vary, with around 80% LTV for approved land and 50% for resale land.
Home loans offer more flexible funding options, with LTV ratios typically ranging from 80% to 85%.
Loan tenures can extend up to 30 years for home loans, while land loans are limited to 15 years.
Summing Up: Plot vs. Flat
The plot vs. flat dilemma doesn't have a one-size-fits-all solution. Your decision should align with your budget, family's needs, and investment goals. Property experts can provide guidance tailored to your unique circumstances. Remember that buying a home is a significant investment, so take your time, weigh your options, and make a decision that aligns with your long-term aspirations. Whether you choose a plot or a flat, may your investment be a wise one that brings fulfillment and satisfaction for years to come.
Comments