When we talk about real estate investment, buying a land is considered to be one of the most important decisions. A decision regarding the purchase of land has to be logical if it is to yield benefits. The supply of land is not much whereas demand for the same is considerable. Builders can increase the floors for vertical expansion but when one talks about horizontal expansion, land purchase is essential. And since there’s a dearth of land in metropolitan cities, the government has granted the permission in certain areas to expand vertically.
Buying a land is buying an asset. It can prove to be fruitful in the long run. A slight upward direction in the land rate will lead to a decent amount of profit for the investor. Land rates are increasing day by day and everything about real estate investment feels right but that is not true. Often time, purchase of real estate property comes with a catch. In order to avoid being a victim of it, there are several things you need to consider.
Legal Dispute: It’s one of the most common forms of dispute. The legal dispute is everywhere around the country. When you are purchasing a land make sure that the land is not in any legal trouble. Moreover, it is important to ascertain whether a land is free from legal troubles or not. Because the amount that you are looking to invest will be huge. And through Land Purchase Loan you must get it right at all cost.
Faster growth: It is common knowledge that the value of a land grows faster than that of a flat. This by far is one of the most compelling factors which lead to land purchase loan. One cannot predict the rate at which the land will grow in the next five years. In most of the cases, the value of the land is ever growing. Thus invest in land for better appreciation.
Documentation process: When you purchase a property you are the lone stake owner. Thus if anything goes wrong you have to fight it on your own, unlike flats where other owners help you. A person must be very clear about the documentation process and local laws relating to land ownership and transfer must be understood pretty well before the real estate investment is made.
Survey the land: A deep homework on your end would do you a lot of good. Surveying the land will help you understand in detail about the land. It is essential since the amount involved is huge. Survey the land and make sure if the land is free of trespassing and illegal activities.
Know that land is a non-productive asset: A land doesn’t generate income. Although appreciation is much more than that of a flat, it isn’t productive. One should be wary about this part.
Wealth Tax: Under land buying, wealth tax becomes applicable. You are required to pay wealth tax if you have more than one property. One property can be shown as self-occupied but in the case of two, the wealth tax is applicable even the land is a non-productive asset.
Income Tax benefits: Buying a land requires you to opt for Land Purchase Loan. Under Land Purchase loan you cannot avail income tax benefits as under Home Loans. Thus remove the misconception that you are going to get income tax benefits through land purchase.
These are the basic things that you need to keep in mind. There are several others such as loan to value (LTV), the rate of interest and other factors that you should have decent knowledge about before you make a real estate investment. A fair consideration of the aforementioned points will help you a lot in your cause for a profitable land purchase.