Is It Safe To Investment In A Plot Rather Than An Apartment During The Pandemic?

The COVID-19 pandemic has raised the demand for plots as buyers find this asset class as relatively low investment option with minimal project execution risks and quick exit opportunity. For the developers too, rising demand for plots mean easy way of generating quick cash flows. Also, they see it as a rational strategy to liquidate land banks for raising working capital.

Rising demand for plots that ranging from Rs 20 lakh to over Rs 50 lakh is seen in Haryana which was a result of the Deen Dayal Jan Awas Yojana. Same rise in demand for the plots is registered in some cities of Uttar Pradesh and Punjab, not to mention Bengaluru, Hyderabad, Chennai and Pune.

Some of the renowned developers with plotted developments include DLF Ltd., Mahindra Lifespaces, Raheja Group, Godrej Properties, Century Real Estate, Puravankara’s Provident Housing, Shriram Properties, Goel Ganga, TVS and Alpha Corp, among others.

The minimum size of plot is 550 sq. ft., and goes up to 10,000 sq. ft. Large sized plots are also available in some projects. The maximum demand came for plot sizes ranging between 1,200 sq ft to 2,500 sq ft. However, in some cities of Bengaluru and Chennai, plots of average sizes 550 – 750 sq ft are also raising interest in the homebuyers.

Anuj Puri, chairman – ANAROCK Property Consultants says “Some buyers are even considering plots in gated societies and build on and use, as standalone homes are the safest bet in a pandemic situation. The rise of the work-from-home culture is also closely interrelated. For developers, plotted development is a smart strategy to liquidate land banks for raising working capital. The asset class requires minimal capital investment, limited project execution risks and faster exit opportunity,”

Haryana government’s Deen Dayal Jan Awas Yojna scheme allows a developer to either sell bareshell plots or developed plots.

Mr. Pradeep Aggarwal, chairman and founder, Signature Global, says that “We are developing 80 sq m to 150 sq m plots in Sohna, Gurugram and Karnal. We are also constructing four floors on a 100 sq yard plot as floor wise registration is now allowed,” He further added that “we will be launching more plotted projects before March 2021.”

It is also important to note that a luxurious apartment in a high-rise format costs upwards of Rs 70 lakh and in low rise it costs anything between Rs 40 lakh to Rs 45 lakh which is about 25 % less.

Mr. Paredeed Aggarwal further added that “Floors will be a game-changer for the real estate market and demand for high-rises may actually come down going forward,”. He then added that “a low-rise project gets completed within two years compared to high-rises that take over three years and there is also the option of getting an occupation certificate for completed plots rather than towers”.

“The format works best in today’s market conditions because liquidity is faster, construction challenges are less and there is no pressure to complete the entire society before procuring an occupation certificate,” he said, adding there have also been cases wherein people have bought all the four floors.

“Four floors with 12 bedrooms and 4 large size living rooms on each plot for Rs 2 crore offers a better proposition than a Rs 2 crore apartment in a high rise for which the wait may be longer,” he said.

Why investing in a plot is better than investing in an apartment?

In a scenario where thousands of homebuyers have been left in the lurch by developers by not giving possession to them for more than a decade, buyers have become skeptical of investing in projects that are yet to take off and may take more time to get completed. Plots, therefore, are always a better investment options for buyers.

Anckur Srivasttava of GenReal Advisers says that “A high-rise development requires construction finance and has a long drawn construction cycle. The end-user today prefers investing in real estate where there is visibility of structure and delivery is barely a few months away. Therefore, an investment in a plotted development makes sense.”