Plot of Land

Real estate refers to immovable properties in the form of an open plot of land or commercial and residential structures.

The real estate industry is always looked upon and known for its glamour for generating extraordinary returns for its investors and helping them multiply their wealth with many more benefits.

However, since the last few years, this asset class is seen struggling and has failed to generate impressive returns due to various macroeconomic market forces.

Despite the above fact, it continues to remain one of the most attractive investments and a favourite of many investors due to its reliability and ability to generate superior returns in the long run.

 

In this section, we are going to discuss various aspects of investing in an open plot of land.

 

 

WHY ARE INVESTORS KEEN ON INVESTING IN PLOTS?

The following are some of the reasons why property investors are keen on buying an open plot of land in India.

1. Affordability – Plots are much more accessible to common people as compared to residential and commercial units since they are available at a much lesser cost.

 

2. Superior returns – Open plots in developing areas appreciate much faster than residential and commercial structures as they can be developed as per the owner’s requirements.

 

3. Flexibility – Open plots offer higher flexibility to its buyers since they can carry out construction and build structures as per their requirements.

 

 

THINGS TO BE CAREFUL ABOUT WHILE BUYING OPEN PLOT OF LAND

All investors must conduct the following due diligence before buying an open plot of land in India.

1. Due diligence – The number of documents involved in buying a plot of land is too many.

Hence, the higher the number of documents involved, the higher will be the risk of legal issues. Hence, it is always advisable to hire a well qualified and experienced advocate to get through such processes.

 

2. Check the dimensions of the land – It is of utmost importance to check the land dimensions in 7/12 extract and match it with the Agreement for Sale. In order to do that, one can appoint a government approved surveyor, get it verified and preserve his report for future reference.

 

3. Pending loan against the plot – It is important to verify whether there is any pending loan against the said plot.

The seller of the plot could have taken the loan for buying a plot or could have raised against the same for any other purposes.

 

4. Plot type – It should be noted that the buyers cannot use the plot for any purpose they desire. The plot can be used only for a specific purpose as mentioned in the document called “7/12 extract”.

It could either be an agricultural or NA plot.

Even NA plots have many types like residential plots, commercial plots, plots for resorts and hotels etc. Hence, the buyer must specifically look for the NA plot of a particular type if they intend to develop the plot for the purposes other than agricultural activities.

Even proposed NA is not good enough as the process of converting agricultural land into the NA plot is very complicated and lengthy and does not guarantee the conversion either.

 

5. How much is the FSI – The “Floor Space Index” (FSI) that determines the level of construction that one can carry out on the said plot should also be verified.

For example, on a 10,000 sq. ft. plot with an FSI of 100%, one can build a structure covering 10,000 sq. ft. If the FSI for the same plot is 50%, then the structure covering only 5,000 sq. ft. of land can be constructed.

You may come across a large plot at a very low price which may look very lucrative at first however, it is quite possible that the FSI of the plot is very less.

For example, the FSI of 10% of a 10,000 sq. ft plot means that you can only build a small house of not more than 1,000 sq ft. and the rest of the land has to be left the way it is.

 

6. Location of the plot – The location of the property cannot be ignored given the fact, that certain areas are declared to be under “Green zone”. In such cases, one cannot carry out any kind of construction work and cutting of trees.

Also, while buying a land near the sea, then due to the presence of soft sand, the buyer will have to be very careful while raising any kind of structure.

Hence, it is very important to know the purpose of buying the plot of land and act accordingly.

 

7. Encroachment risk – Open plots are highly vulnerable to the risk of encroachment if left idle for a long time.

 

 

IMPORTANT DOCUMENTS TO CHECK WHILE BUYING OPEN PLOT OF LANDS

The following are the important set of documents that every investor must verify before buying an open plot of land in India.

1. Original title deeds – One can also refer to it as an ownership document of the said plot of land. The buyer must obtain the original title deed to claim the ownership and ensure the land is in the name of the seller and in case of multiple sellers, all the parties have signed the sale deed.

 

2. Encumbrance Certificate – “Encumbrance certificate” highlights any pending legal dispute on the said plot of land. This certificate can be obtained from the sub-registrar’s office where the Sale Deed of the land has been registered.

 

3. 7/12 Extract – It is the extract from the land register of a particular district and is one of the most important documents pertaining to any land which is maintained by the revenue department.

It mentions all possible details about the land including details of current and all previous owners, whether it is an agricultural or NA plot, survey number, the dimensions of the plot, any lien marked or legal dispute pending against the plot etc.

 

4. Tax payment receipt – The buyer needs to ensure that the land is registered with the concerned tax authority and all the tax dues till date is cleared.

 

5. NA order – All the land in India is agricultural unless specifically categorized as “Non-agricultural” plots for various other purposes.

It should also be noted that not all NA plots can be used for building residential structures. Hence, before buying the land, the buyer must ask for the NA order to know the type of land. The following are the types of NA plots.

• Residential

• Commercial

• Warehouses

• Resort

• IT