Plot vs Flat: Which is a better investment option for you?

 Plot vs Flat: Which is a better investment option for you?

Real estate is a preferred investment option for a few investors. Investment in this sector can also help diversify the investment portfolios of investors looking for an additional source of income.

According to a joint report by NAREDCO and EY, India’s real estate sector is expected to reach a US$ 1 trillion market size by 2030.

So, are you looking at real estate as a form of investment? If yes, you might be confused between buying a flat or a plot.

In this article, we will look at the different aspects of buying a plot and buying a flat so that you can make the best decision.

Appreciation rate

Although plots and apartments form a part of your real estate portfolio, the appreciation rate of these categories will vary. Typically, we see that the appreciation rate or the return on the investment on plots is generally higher than apartments as the plots’ supply is limited compared to apartments. Moreover, the value of apartments tends to depreciate over time due to normal wear and tear. However, there is no normal wear and tear in the case of plots. Moreover, if the plot is situated in an upcoming place, the appreciation rate will be greater than other plots in already-developed areas.

“Plots usually gain value faster than flats. For flats, while the underlying land on which the flat is situated might go up in value, the building itself gets old and depreciates in value. That’s why brand-new flats cost more than older ones, even if they’re side by side.

Modification

When you buy a plot, you can build the house as per your taste and modify it as required. You have the freedom to build a villa or a building with several units for rental purposes.

However, when you buy an apartment, you have limited freedom regarding modification. These modifications will be basically internal changes.

Delivery

Delivery of plots is almost immediate. On the other hand, you might have to wait for several months or even years to get possession of your apartment. This makes apartments a risky endeavour for many investors. While there are laws to protect buyers, delays and legal issues when buying a flat are very common.

Legal issues

“When you buy a plot, you’re essentially purchasing ownership of that land. But when you buy an apartment, you’re acquiring the unit within a building on a piece of land. There’s a potential risk here: the building your apartment is in could have disputes or issues down the line. That’s why it’s crucial to verify the land’s ownership when buying an apartment," 

You can invest in a plot if you are looking at capital appreciation, want to build your house as per your terms and have enough time and expertise to monitor your investment and construction progress.