Land has traditionally been seen as a desirable asset class for investment purposes in India. In spite of the availability of a wide variety of financial instruments including mutual funds and equity shares, it has not experienced a decline in popularity. But, before you go ahead and invest in land, you need make sure you are informed of both the benefits and the risks involved.
The availability of land is constrained, with the exception of a few isolated instances of land reclamation, and the prospect of producing additional land is virtually nonexistent. The demand for land has only been rising up as a result of the limited amount that is available and the ever-increasing requirement. On the other hand, as a result of the persistent demand, the cost of land has not been subject to the erratic swings that are typical of prices for other assets such as gold and stock.
Investing in land is a high-risk endeavor because of its low liquidity.
Investing in land typically requires a substantial capital outlay on the investor’s part. Individuals that have less savings won’t be able to afford to make land investments. They should put their money into financial assets such as units of mutual funds, shares, regular deposits, or even gold. This is the best course of action. Furthermore, an investment in land is highly illiquid, meaning that you cannot sell your property whenever you wish to turn it into cash. You are restricted in your ability to do so. Because of this, making an investment in the first place may seem like it was a waste of time and money while in reality it was just a waste of time and money.
Investing in property exposes investors to the dangers of acquisition and encroachment.
Every one of us has, at some point in our lives, heard a story about how the invasion of land caused investments to fail. Your legal right to the land may be at jeopardy in some circumstances, which may lead to litigation and excessive fees associated with legal representation. These supplementary costs may, on occasion, be greater than the value increase that has resulted from the appreciation of your land for sale Tulum mexico.
There is also the possibility that the government would acquire ownership of the land through a process known as forced acquisition. There is no guarantee that the compensation obtained will meet all of your expectations. The purchase of land in the dispute over Noida Extension serves as an excellent illustration of this type of event.
Because there is a lack of available capital, investments in land cannot be made.
Borrowers are only allowed to receive up to 80 percent of the value of the property when applying for a loan for the purpose of purchasing or building a home. If you buy a piece of land with the intention of building a house on it, you may qualify for a combined loan that will pay both the price of the land and the price of building the house. Yet, in most cases, a financial institution would not lend money to buy a piece of property unless the land in question is acquired from a recognized and well-known government development authority such as DDA or MHADA.
Investing in land can result in favorable tax treatment.
According to Section 24 and Section 80C of the Income Tax Act, you are able to make a claim for tax benefits related to the payment of interest on a mortgage as well as the repayment of the principle on a mortgage. There is no such rule that applies to the interest that is paid on money that was borrowed for the purpose of investing in land.
Things you should be aware of before making an investment in land
Because investing in land typically involves a significant amount of capital, you should be certain about the goals you hope to achieve with this purchase. Be certain that the land possesses all of the required permissions before you purchase it with the intention of using it for residential development.
Check the land conversion norms before making the purchase if you intend to use it for commercial development. If you intend to buy it for purposes such as producing cattle or vegetables, planting a vineyard, or using it for leisure purposes, you will need to investigate whether or not you require any permits or other documentation.
There is always the possibility that the land-use regulations will place limitations on the ways in which the land’s owner is able to put the property to use. It is possible that you may need to investigate the land easements, as these could provide access to a section of the property to a third party who is unrelated to you. For instance, the transfer of mineral rights might give an unconnected third party the ability to extract and sell minerals for monetary gain. This is because mineral rights can be “conveyed.”
Before purchasing the land, prospective buyers need to ensure that they have access to fundamental amenities, such as a reliable source of electricity and water. In addition to this, the buyer should investigate the annual property tax obligation that is associated with the land, as well as the distance that separates the land from the closest community.
Investors should be aware that purchasing raw land is a high-risk investment because the property will not produce any income and may not result in a substantial cash gain when the property is eventually sold.