r2i forum

I hear this word repeated often in NRI circle - that they are buying apartment for investment. Down here we dont hear that often.

Apartment is good for living; good for social life;
it is good for those who can't afford to buy an individual bunglow but like that location, wish to buy a roof in that locality;
It is good when you dont have money and looking to pay back in installments ;
Apartment is also good for tax deduction ;
apartment is good when the housing loan int rate is low ;

But it was never good investment.

Let me explain before you jump on me and tear me apart for saying that 'stupid comment'.

I know several of you bought apartments for 30-40 L few years back and they are now may be 50-70 L.

You ask : Is it not a nice investment ?

I say: No. { read the question in the end of this post and answer me }

Let me ask you this. SBI gives you 7% on a fixed deposit, BoB is giving 9% on the same term ? Which bank will you choose for your deposit ?

Will you choose SBI and after a year tell every one you made a nice investment ?

All of you who bought apartment also had a choice to invest in land or plot.

Did any of you compare your appreciation of the apartment that you bought against the appreciation of the land you did not buy ?

Still believe you got nice investment decision made.. ??

RRK, Your points are well taken and they might be applicable to Chennai and southern cities. In Mumbai there is no land available for these kinda of investments in metro or relative outskirts. In Pune there could be few instances but there are title problems with many of them. People prefer to buy apartments in this part of India. Bangalore has sites and if one finds a clean title then it makes sense to buy those.

Principally RRK is right, however you have to choose an apartment many times due to these factors with plots :

- It is typically unlikely for us to be able to afford a plot in the same area where you can buy an apartment .

- Issues with security of the plot.. unauthorized occupation, good title and so on..

RRK, What you said is pretty true. But ppl do prefer apts because of white transaction, easy loan availability, lower degree of encroachment issue compared to vacant land. It is like SBI 7% but it is FDIC insured :)
I personally prefer land for the reasons you mentioned.

vsudhu;72740Principally RRK is right, however you have to choose an apartment many times due to these factors with plots :

- It is typically unlikely for us to be able to afford a plot in the same area where you can buy an apartment .

- Issues with security of the plot.. unauthorized occupation, good title and so on..

These issues can be thorny but buying your parcel of land as part of a larger layout promoted by a reliable developer mitigates the second risk. Encroachment risk is lower when surrounding plots were bought at similar prices by other people like you. Isolated plots sold by individual owners do have higher encroachment risk. The first is really not a risk at all - I would bet that you will be able to afford a plot in an upcoming area for a similar price as a flat though not at the "best" location in your mind. Over the long term, your land investment will return more than the flat.

RRK is absolutely right, land is the only thing that appreciates. Building always depreciates. Flats appreciate only because of the underlying appreciation of the undivided land but in the long run (perhaps after 10-15 years, depending on construction quality), I believe flats will decline in value overall despite underlying appreciation of the land. Why? Imputed cost of destroying old flats (not to mention the nightmare of having all residents agree to this proposal :eek: ) and rebuilding new ones. The building society that my uncle used to live in a prime area of Chennai built a new one in place of their dilapidated building - after nearly 20 years of negotiation with all residents/tenants (total of 24 flats)! This is inspite of a reputed builder promising everyone a new flat of the same size with new furnishings provided they agree to have about 12 more built on higher floors that the builder could sell. I heard some flat owners who agreed to this proposal early (based on its financial merit) passed away long before their wish was realized.

Plot Vs Apartment : Which is good as investment choice? It depends. I do not agree with unilateral view that plot is better as an investment choice.

Plots in general appreciates at a faster rate than apartment do because apartment have a building component which depreciates over a period plus an apartment restricts end use of the property while a plot may offer flexibility.

But investment in a plot comes with higher component of risk, it could be encroached, it does not generate recurring income, it has a huge cash component with which not every one may be comfortable.

Huge advantage of buying an apartment is the ability to leverage . One can leverage by borrowing as they are typically cheque payments. For example if you have bought a plot for Rs 10 lacs three years ago and let us say it has appreciated to Rs 40 lacs today. Alternatively you may have bought an apartment for Rs 40 lacs three years ago with Rs 10 lacs cash upfront and Rs 30 lacs of home loan, it may not have appreciated at the same rate as land but it may have doubled to Rs 80 lacs. This essentially give you similar returns on your original investment , plus will generate some 4 to 5% returns by way of rent. Moreover you maybe in a position to buy an apartment even if you are not living in the city and encroachment risks are not there.

Equities in general have outperformed all other asset classes in returns, but it does not mean one should invest only in equity and rule out other asset classes. Similarly land is a very good investment avenue but does not mean you should ignore other forms. In fact one should look beyond homes and invest in commercial properties and retail mall properties. Investment is a function of ones risk taking abilities and returns will commensurate with risk taken. Land is a higher risk higher return proposal.

Its a no-brainer that land in locality X is a better investment choice than apt in locality X.

Where is the confusion ?

Plot in location X better than apartment in location X may be a better investment if one can afford to buy plots instead of apartments. This is theory at best

Often the practical choice is between apartment in a well developed location versus plot in some distant place. Even a plot in a distant place may yield better returns but comes with loads of risks. All that I pointed out there is no unique superior investment choice. It depends on individual choices and risk taking ability.

Since I am from mumbai I tend to be in favour of apartments.

In a place like mumbai an apartments value appreciates inspite of age. In case of other cities also things are changing. Pune also fetches good resale value for apartments. It depends on the investment horizon. If you plan to hold for 6-7 years then You should be good and the apt should fetch good value

As someone mentiomed ability to leverage is also a factor. You can get at apt at 90-95 % down with corporate tie-ups.

Rent and tax benefits is another variable in the equation.

Clean Land titles, Land Grabbing(Has happened to a relative of mine who was threatened so that a builder could build a building there), Govt policies(what if the govt looks at vacant plots and decides to build a road or a sez. They would compensate you at govt rates. I know of an instance where such plots were acquired for an industrial area for MIDC), construction allowed is an issue at times. Sure one could buy in a bungalow society but ther could be some issues there.

Further there is a trend amongst the young and also the very old to stay in apts as they provide security, neighbours, less hassles, easy maintenence. so bungalows are not so much in demand as they were earlier.


Again plots are good if you get them cheap and they rise well in value. But you need the ability to track such plots