Plot vs Flat: Which One is a Better Investment Option?

Investing in real estate is a common practice in India. For many, it is a once-in-a-lifetime opportunity and a long-term financial commitment. Hence, the dilemma as to whether you should invest in a plot vs flat is natural. The decision depends on a variety of factors like your needs, lifestyle preferences, and other aspects like taxation and loans. While both investment options are creditworthy, they each retain certain merits and demerits.

Here’s a comparative analysis of flat vs plot which will help you arrive at a definitive stand as an investor.

Flat

A flat is a multiple-storey construction where all the houses built within are of the same size, layout, design, and architecture. In a flat, there can be 1, 2, 4, or even 6 houses per floor. Some flats have balcony options, some have penthouses on the top-most floors. In many flats, builders give multiple designing options. For example, the west-end houses could have 4 bedrooms with a single balcony while those on the opposite side could have 3 bedrooms with 2 balconies.

Plot

On a plot, the buyer has the freedom to choose what kind of construction they want. The control over layout, size, materials, and painting designs is in the hands of the buyer. The best part about a plot is that you can make the bungalow or erection look luxurious through smart space utilisation.

Plot Vs Flat: Comparison

Plot or flat: Which is the better investment? Let’s find out.

Effort

While purchasing a plot, one must have an approved blueprint of how the construction would look like. This process requires considerable devotion of time and effort. One could also hire an architect or a contractor to execute it, which would increase the size of the investment. Supervising the construction, arranging finances, and dealing with local bodies and contractors, are some tasks that would require constant attention.

On the other hand, when you buy a flat, the developer grants possession upon the completion of the flat. Moreover, a flat comes with basic amenities like power backup, water, maintenance, security, and some added amenities like a clubhouse, swimming pool, and gym.

You will have to make all the necessary arrangements if you choose to purchase a plot and construct a home there. This makes buying a flat a good proposition.

Returns

It all boils down to the returns you receive from a particular investment. It is said that plots appreciate but flats tend to depreciate. This is primarily because they are less in supply in the market. It is also because the age of a plot does not affect your decision, as it does in the case of flats. The return on investment also depends on location and proximity to other big ventures.

Neighbourhood and quality of the locality, have the ability to push up or pull down the value of the property. Along with that, metro lines, transit hubs, or other new kinds of connectivity spur development and may attract new residents, and raise demand for your property.

Must Read: Buy or Rent a House: Which is a Financially Wiser Option?

Purpose

All of us invest for a fundamental purpose - to earn profits. For that, recognising the purpose of your investment is crucial. For example, if generating a consistent income is on your mind, you should go forward with spending on a flat as it comes with the advantage of renting it out whenever you need extra funds. This is not possible in the case of a plot unless you construct a full-fledged housing society and sell the individual units. But that is an exorbitant task.

Duration

Ready-to-move-in flats might be expensive but enable easy possession. On the other hand, under-construction flats can take years to provide ownership. Plots are your own property and you can move in anytime you want. You can accelerate or slacken the construction process as per your need or want. It provides you the flexibility to move things at your own pace. This highlights a major difference between plots and flats.

Customisation

Once a flat is constructed, you cannot increase its carpet area or make changes to its layout. Plots allow for greater flexibility in the construction of any kind of building, including offices and standalone homes.

Additionally, buying a piece of land provides one the freedom to design and construct a building in accordance with their individual tastes and needs. On the other hand, a flat is a pre-built structure. There isn't much room for customisation to meet the needs of each buyer.

Tax

Plots and flats receive distinct tax treatment. The monthly loan repayment helps you to avoid paying taxes when you take out a home loan to purchase a flat or builder's floor.

You can also claim a deduction for the interest you paid on the loan of up to INR 1.5 lakh every fiscal year. Additionally, a deduction of INR 1 lakh may be made for principal repayment. When it comes to plots, tax deductions for interest are only permitted after the completion of the construction.

Finance

A buyer can raise to purchase a plot or land but within certain conditions. A residential plot can only be purchased with a loan if the land has received local authority approval. A permit of 80% Loan-to-Value (LTV) is allowed, but roughly 50% of LTV is permitted for resale land.

A buyer can obtain close to 90%* finance for a property loan (under NBFCs like SMFG Grihashakti). Additionally, the maximum loan term for a home loan is up to 30 years*.

Conclusion

Despite the fact that both plots and flats offer advantages and disadvantages, you should make your decision through a rigorous evaluation.

If you want to put your money into real estate, you can turn to SMFG Grihashakti. With home loan amounts of up to INR 5 crore*, interest rates starting from only 9.5%* for salaried individuals and 10.5%* for self-employed, and eligibility age being only 21 on, make the most of this housing finance opportunity.