by Anushree Ghosh
Pros and cons of investing in land
Land investments have been one of the top three investment options in India and like the other options, it has its pros and cons. A piece of land can be used in several ways— home, hotel, resort, mall, multiplex, farm, etc. While there can be government restrictions; in general, there are myriad possibilities to explore before deciding the fate of your land. Despite strong competition from the availability of other financial products like mutual funds and shares, land investors never lost their faith in it.
Here are the cons and pros you must consider before investing in the land:
Illiquid investment: It is an illiquid investment as you cannot dispose it off as per your ease when you want to exchange it for cash. The time taken to sell land cannot be estimated accurately. This is not an overnight process and hence it can be tedious at times. The amount of money that is to be used for buying land can be hard to dispose at the buyer’s end, thus if it is about the liquidity of the asset you are concerned about, then you must go for mutual funds or gold.
Encroachment of land: Encroachment is when some other person intrudes the boundary of your land by building a structure or occupying it physically. In the more serious cases, the cases of encroachments go to court for years before any substantial judgement could be reached. During this time, though the land price could go up the unnecessary cost of fighting it legally adds up to your burden, you can’t even let it go, as to encash the land you have to have its full possession.
Physical issues with the property: Sometimes the vacant land can have its own issues to deal with—for instance, if it is on a mountain then constructing anything on it becomes difficult. Also, there can be problems related to sewer, land acquisition, affected by natural calamities etc.
Less Investment: The maintenance cost is extremely low, after you do the initial cleaning up and put boundaries, there are no recurrent costs like repair and payment of extra bills.
Higher resale value: The land value generally increases with time, as the condition doesn’t deteriorate like that of a flat or bungalow. Also, less availability of land means more demand and therefore increase in value.
While the government’s initiatives are worth applauding for, it will take many years to bring transparency in the system. What as investors or buyers, we must keep in mind is to thoroughly check everything before buying something that becomes difficult to sell off later.