Pune

D G Gaikwad retired early this year but is facing a big worry. Where to invest his lifetime savings so that it is safe and gives him good return on investment too!, he is in a dilemma over buying a plot or a flat.

Investing money in a property is not an easy task. Not only does one need to find a safe avenue, but also think about what to buy–an apartment or a built-up house, or a plot. The decision depends on your needs, lifestyle preferences, and other aspects like taxation and bank loan.

While investing in plots or land means building a house as per one's own requirements and approved layout, a flat is a multi-floored construction with no freedom to change the construction layout and size.

In a plotted development, you are responsible for the construction and security of the built-up house, whereas, in an apartment, there is the benefit of security, location, and accessibility.

So which one is a better option–plot or flat?

Effort

While buying a plot, one has to plan construction on an approved layout and hire an architect or a contractor to execute it. Apart from supervising the construction, arranging finances and dealing with local bodies and contractors, it involves a lot of leg work over little things.

But, when you buy an apartment, the developer is in charge and gives possession upon the completion of the flat. One only has to worry about furnishing the house and not the actual construction.

Moreover, a flat comes with basic amenities like power back-up, water, maintenance, and security and some added amenities like a clubhouse, swimming pool, etc.

If you decide to buy a plot and build a house on it, you will certainly have to make all arrangements on your own. This makes buying a flat a good proposition.

Delivery

While it may take some months or even years to get the possession of an apartment, plots are usually ready for possession. If your choice of plot is part of a township, you are likely to get possession of the plot earlier than a flat.

Returns

Experts say that plots appreciate faster than apartments. This is mainly because plots are less in supply in the market. Age does not affect your investment in plots, as it does in the case of apartments. Appreciation depends on the location and proximity to big infrastructure projects. Also, during stable market conditions, the worth of a plot rises with time.

As developing a plot is easier, it has more takers, therefore, it is easy to exit your investment when you want to.

"If you are looking for a regular yield, going for an asset like commercial, office, retail, etc, would be useful. If you wish to use it as a store of value, then it boils down to your outlook. If you have a long-term outlook, buying a piece of land is worth considering; for shorter terms, go for a relatively small apartment unit,"

Location, surrounding infrastructure, and the quality of neighbourhood push up the value of apartments, as they do for plots too.

Tax

Tax treatment for plots and flat is different. When you take a home loan to buy an apartment or a builder floor, the monthly loan repayment allows you to save tax.

"You can also avail of a deduction of up to Rs 1.5 lakh in a financial year for the interest you have paid on the loan. Also, Rs 1 lakh deduction can be claimed for repayment of the principal. In the case of plots, tax deduction on interest is allowed only from the time the construction is completed,"

Income

If earning a regular rental income is on your mind, you must invest in a built-up flat. An apartment can be rented out to fetch you some income, whenever you want, which is not possible in the case of plots.

There is no income from plots till the time you construct upon it. "Today’s market is driven by end users. A Thinkstock project located in a developing area or in a gated community and, one which has been approved by local authorities, is a safe and profitable investment,"

Funds

A buyer can raise finance to buy a plot or land, but there are some conditions.

"You can only get a loan for buying a residential plot if the land has been approved by the local authority. We allow 80% Loan-to-Value (LTV), but in the case of resale land, only about 50% of LTV is allowed,"

"In the case of a home loan, a buyer can get nearly 80-85% funding. Moreover, the maximum loan tenure for a land loan is 15 years, but, for a home loan, it can even go up to 30 years,"