Land Investment in India: Opportunities, Advantages, and Strategies [2024]
The rise of the real estate market in India has taken place in the past decade, and this has been attributed to urbanisation tendencies, an increase in the middle-income group, and the liberalisation of FDI.
Thus, driven by change, this social nexus has invented the business of land investment in India. Land Investment in land in India can potentially penetrate every single inch of urban and rural India, making it highly attractive for domestic and foreign investors.
Types of Land Investments
Investors in real estate in India can find several avenues to invest in land depending on the type of their investment plan and risk-taking ability.
Agricultural Land
Acquiring agricultural lands in India for investment is generally profitable, especially in areas endowed with productive soil and appropriate climate. These lands can be rented to farmers or used for growing cash crops, thereby ensuring the generation of either rental income or future income through increased land value.
Residential Plots
One good investment is residential land plots, especially in growing urban centres or emerging suburbs. Many people require a place to live, and investors nationwide appreciate residential land as it caters to the growing need for shelter and accommodation.
Commercial Land
India has several commercial plots for sale and lease for retail, office, and other purposes, which give good yields. Such properties are generally sought after, mainly in strategic areas, and can fetch steady rental income or be utilised for future business developments.
Industrial Land
Purchasing land within industrial zones for production factories, warehouses, industrial parks, and SEZs is also a good investment. They attract interest from investors via businesses looking for locations to start or grow businesses, hence offering an opportunity to earn money back apart from the capital appreciation plus rental income in the long run.
Advantages of Land Investment in India (2024)
- Capital Appreciation: The slow appreciation of land values in India, primarily due to urbanisation, growth, and development, has indeed bet on this factor as one that would pay off vastly in terms of capital appreciation in the long run.
- Low Maintenance Costs: It is cheaper to invest in than other forms of real estate investment, like residential or commercial properties, because it also requires little or no severe maintenance.
- Portfolio Diversification: Concentrating on land investment minimises and diversifies risk because the real estate market is unlike any other financial instrument.
- Tax Benefits: This is an effective mode of investment as the Indian government provides many tax concessions and rebates, such as reduced tax on capital gains, diminished stamp duty, and even occasional exemptions relating to land investment.
- Flexible Use: Land can also be used for business purposes, such as farming, building houses and commercial buildings, business and industrial production, etc. This puts investors in a position to benefit greatly from their investments.
Government Policies and Their Impact on Land Investment
The Government of India has initiated several policy changes over time that have influenced land investment in one way or another. These are the amendments to land acquisition laws, the enactment of the Real Estate (Regulation and Development) Act, and some tax reforms or incentives introduced recently.
Smart Cities Mission and Bharatmala
The successful implementation of two big schemes by the Government of India, Smart Cities Mission and Bharatmala, has left a significant mark on land investment across the country.
The Smart Cities Mission launched by the Government of India to develop smart cities around selected clusters of cities has influenced the demand for land in these cities, resulting in an upward trend in their land values.
Similarly, the Corporate Road Infrastructure development or Bharatmala project has stepped up connectivity across the country, making the hitherto unserved or less served regions more attractive for the land, such as surrounding areas of new corridors.
Financing Land Investment
Home and land loans are two kinds of real estate loans but differ in their target and character. Home loans are mainly incurred to purchase finished residential units, while land loans are meant to buy bare lands.
Land loans involve considerably higher risks than house loans, so they have their own set of requirements and terms.
How to Secure Financing for Land Purchase?
The process of sourcing funding for land acquisition in India is elaborate. Applicants of the investors must collect the required documents such as land documents, income proofs, and security documents.
They also need to be acquainted with the legalities associated with financial institutions involved in funding, such as banks and non banking financial companies or NBFCs, which will have their norms for land investment financing.
Impact of RBI's Interest Rate Policies
The interest rate policies formulated by the Reserve Bank of India (RBI) considerably affect the financing of land investment in India. Fluctuations in the repo rate, the base rate of interest charged by the RBI, affect the interest rates provided by the banks and NBFCs.
If interest rates increase, the cost of obtaining land financing rises, which may threaten real estate investment's viability and profitability. On the other hand, a decrease in interest rates might enhance land investment, given its attraction to investors.
Emerging Trends in Land Investment (2024)
With the expansion of the Indian real estate market, the following trends can be highlighted to characterise the contemporary scenario of land investment in India.
- Green and Sustainable Land Development
This has been attributed to enhanced awareness of environmental conservation and the requirement for sustainable geographic development. Now, investors are looking to invest in land plots planned for construction, the eco-tourism sector, or other initiatives that use renewable energy, save water and build with a low carbon footprint.
- Fractional Ownership and Small-Scale REITs
Fractional ownership entails several investors pooling and owning a single land parcel, meaning several can easily undertake land investment. Small-scale REITs, in contrast, create an opportunity to collect funds and invest in a package of specific land assets. However, it gives more liquidity and professional management certainty than invested land.
The Future of Land Investment in India
Long-term Prospects
The fundamental forces leading to increased land investment in India are expected to remain in force in the foreseeable future, including the growth of urban civilisation, the increase in the size of the middle-class population, and the expansion of the overall Indian economy.
The expansion has caused a gradual rise in the price of land demanded for residential, commercial, and industrial uses. Further, the government’s concentration on infrastructure development and ever-evolving progressive real estate policies are expected to boost the return on investment in land even more in India.
Impact of Infrastructure Projects like DMIC and New Airports
The Indian authorities’ large-scale Infrastructure development initiatives, like the Delhi-Mumbai Industrial Corridor (DMIC) and the new Green Field International Airport projects, are expected to shift land investment trends in India.
The DMIC is a large industrial development plan that covers several states and is designed to increase demand for land, which should raise the value of the land in the zones.
In the same way, the construction of international airports in suitable feeder locations is likely to trigger the growth of feeder locations with potential for investment in commercial, residential, and industrial developments, notably through property development and the sale of plots of land.
Tips for First-Time Land Investors
Entering a new business as a land dealer is usually thrilling but may also be challenging. But unless new investors are to be disappointed and frustrated, there must be a blueprint for entering the market and an appreciation of the problems that may occur.
Step-by-Step Guide to Making Your First Land Purchase
The process of acquiring land in India typically involves the following steps:
- Choose the place that interests you and conduct a detailed investigation to determine opportunities for increasing sales volume and investment returns.
- Consult reliable real estate agents or developers for data on available land and its legal issues.
- Consider its size, its zoning, its accessibility, and its connectivity to other infrastructures.
- Research the latter, current ownership and title documentation, and any covenants, restrictions, encumbrances, or possible liabilities.
- Ensure you have secured the requisite capital in your funds, loans, or a combination of both.
- Discuss the actual purchase with the partners, sign an agreement, and agree on the procedures for registration and assignment of the ownership right.
- Formulate a development plan for the land for immediate or future use.
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Exit Strategies for Land Investors
These factors may involve issues related to exit time and possible investment development opportunities:
When and How to Sell Your Land?
The timing is critical in investment in land in India. Factors to consider when deciding to sell include:
- Market Conditions: Study regional real estate markets and economic factors.
- Land Value Appreciation: Determine the changes in the land's value since its acquisition.
- Personal Financial Goals: Synchronise the sale with the investment goals.
Methods for Selling Land in India
- Consumer selling or direct selling to builders or other end users
- Using real estate agents or online services
- Participating in land auctions
To maximise returns, investors should:
- Document the property's history and the improvements made to the property
- Collect available land relocations from reliable sources
- Think also about taxation and make all necessary preparations
Read Also: What is EOI in Real Estate? A Simple Explanation
As India leaps forward as an economic superpower, there is no better investment avenue than land. Given the right approach and adequate market analysis, investors can reap the country's real estate market rewards.
Are you preparing to look for prime plotted developments? Check out Rustomjee today to learn more about your perfect land investment opportunity and invest in the Indian real estate sector.
FAQs
1. What are the benefits of land investment?
Below are the 7 advantages associated with investing in a plot of land.
1. Greater flexibility
2. Low initial investment
3. Land appreciates quickly
4. The time between the purchase and possession is technically zero
5. Lower property tax
6. There is no maintenance
7. It is a finite resource indeed
2. How do I finance a land purchase?
Common options include land-specific loans, owner financing options, home equity financing, and USDA financing.
3. Is it a good idea to buy land in India?
Yes, out of all the investments, Land is the best kind, no matter the state where you purchase it. Supported by a higher Return on Investment (ROI), enhanced resale value, and low maintenance cost, it has at least remained the investors’ favourite.
4. Can I buy 1000 acres of land in India?
The size of land that may be bought in India has been capped at 59. Ninety-five acres, which is 15 standard hectares. But the maximum limit for land is 160 bighas or 32 acres at a time. Therefore, generally, a person cannot purchase 1000 acres of land in India. However, these limits may vary based on the state and nature of the land.
5. What is the average return on land investment in India?
Rental yields vary globally, with India having an average rental yield of 2-3%. Thus, for each ₹100,000 invested in a property, a buyer ought to generate around ₹2,000 to ₹3,000 in rent annually. Therefore, for a property costing 1 crore, the owner can quickly get a rent of Rs 3 lakh per annum.
