Land Investment returns are the function of demand & supply.
Remember that as applicable to many investments Land Investment moves through cycles which means land prices can come down or remain stagnant for a long period of time and so are your returns and therefore it is very important that you analyse the land pocket you are considering thoroughly and then only take a decision.
One of the biggest risks in land investment is an encroachment. People buy land mostly out of the city and it becomes difficult for them to monitor and so over a period of time they realize that land is encroached by somebody else. Going through the litigation is a hell of the process which is really painful.
The best way is, to buy a land which is part of a gated community or at least surrounded by known people.
Lots of NA plot schemes are mushrooming around your city but beware; most of them have a faulty title and after investing you may repent the decision. The legal title of your land investment is of paramount importance particularly in a country like India considering the rudimentary status of our land records.
I have come across many individuals who have lost their hard-earned money in these plotting schemes.
No cash flow:
The basic hallmark of any good investment is cash flow. i.e how much money it generates for you; but in case of land you don’t get any cash flow. you are solely dependent on the capital appreciation to get your returns. So you need to be doubly sure that you select the right investment.
When you are able to use others money to fund your investment it is called leverage like in case of a residential property you put a small amount and the rest of the money is funded by the bank. In the case of land, banks rarely fund the investment for obvious reasons so you will have to use your own funds to buy land.
This results in losing the attractiveness of the overall deal from the investment perspective.
As applicable to all Real Estate investments, the land is also liquid i.e not easily salable so in case of urgent need of money, you will not able to get the money immediately consider these points before you take any decision.
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