Plot vs flat – what is the better investment option of the two

When it comes to property investment most people are confused about the better of the two investment options. Typically, first-time owners prefer to purchase a flat, but when it comes to investing in a second property they are conflicted whether to buy a plot of land and build a villa or bungalow on it or invest in another flat. There are several advantages as well as drawbacks of both of these property investment types. Here’s a comparative analysis of plot vs flat.

Flat or plot – which is better 

Construction:

The construction of flats is typically managed by real estate companies and their builders and the buyer simply has to move into a pre-constructed flat upon receiving possession of the house. However, when you buy a readymade flat, you have little to no say in the construction. You cannot really change the shape and size of the flat and have to follow the master plan as designed by your builder. On the other hand, if you purchase a plot of land to construct a house on it, you can design the house as you please. You can hire labour on your own and oversee the construction too. You also do not have to worry about delays in construction or possession in case of plots.

Cost of construction:

When you invest in a plot or flat, you have to consider the cost of construction. The cost of constructing a flat depends upon the locality in which you purchase the flat and the popularity of the real estate developer’s brand. Other important factors that affect the cost of construction include the services provided by the builder and the size of the flat. Conversely, in case of a plot of land, the cost of construction depends upon the locality in which the plot is purchased, the size of the plot of land and its demand in the area i.e. the availability of space.

Value of the property and its appreciation:

This is another factor to consider when you make an investment in plot vs flat. Flats generally have a limited life span, which is why its value diminishes over time. While the value may appreciate in the first few years, its growth becomes stagnant as the building becomes older, requiring reconstruction or remodelling. The value also depreciates since you cannot modify or expand flats as time goes by. On the other hand, it is becoming increasingly difficult to find land space, especially in bigger cities, which is why the value of plots is expected to appreciate rapidly. You can also remodel and reconstruct it whenever you choose.

The risk factor:

With regards to flats, one of the most common issues is that the developer may compromise the quality of construction in order to control costs and meet deadlines so that they can avoid penalties related to delayed possession as per RERA guidelines. If you are constructing the property on your own, you can control the quality of raw material but there is the risk that the land you purchase may go under litigation, which can affect your investment rather badly.

Finance:

When you think of investing in a plot or flat you also need to pay attention to the availability of finance. Most builders have tie-ups with banks and housing finance companies, which makes it easy for the buyer to get a home loan. However, the process of getting a home loan for plots is quite elaborate and in many cases, lenders do not provide finance for purchasing a plot.

As you can see, there is no right answer to the question plot or flat which is a better investment. Both have their own set of advantages and drawbacks. Therefore, the buyer must make a choice based on his/her requirement when investing in real estate.