More Indians Are Buying Land Plots During The Pandemic

Demand for land with the basic infrastructure provided by developers to later build on it according to a buyer’s preference has risen in the country’s top real estate markets, according to Anarock Research. Called plotted development, a developer gets necessary approvals and demarcates the land without building any structure on it.

In Bengaluru, Hyderabad, Chennai, Pune and Gurugram, average plot sizes range between 1,200 sqft and 2,500 sqft, the real estate consultancy said. Smaller parcels of land at 550-750 sqft are seeing traction in Bengaluru and Chennai, it said.

The Covid-19 lockdown decimated demand for the real estate sector, already saddled with inventory and stressed projects even before the virus outbreak. While developers have seen apartment sales improve as India reopened the economy, more Indians are considering buying land.

Covid-19 has increased demand for land as a long-term investment, said Santhosh Kumar, vice-chairman, Anarock Property Consultants. “A few buyers are even considering plots in gated societies where they plan to build and live as standalone homes are the safest bet in a pandemic-like situation.”

The starting price in the top cities is as low as Rs 14 lakh. Plots priced up to Rs 70 lakh currently see the maximum demand, though larger plots are also seeing traction, Anarock Research said.

Selling plots carry low execution risk for developers as it involves lower investment cost and a quick exit from the project.

Godrej Properties Ltd. said in an investor call after its second-quarter earnings that it’s “significantly focusing on plotted development, given the unique benefits that opportunity provides”.

Post-Covid-19, demand for villa plots has shown good growth, said Niranjan Hiranandani, chairman and managing director, Hiranandani Communities. “Wellness and a holistic health-conscious environment where residents are safe within an environment of affordable luxury—these are the primary drivers of growing demand in this segment”.

Hiranandani is offering plots at Oragadam in Chennai and plans to extend it to the coastal retreat town of Alibaug, south of Mumbai.

Plot Economics

The cost difference between selling a plot and an apartment in a given area depends on multiple factors, including amenities on offer, total built-up area and construction materials used, said Kumar of Anarock. “For both property types, statutory costs (stamp duty + registration) are common.”

“As for apartments, there’s a basic cost (carpet area multiplied with per sqft price), parking charges, infrastructure development charges including local water and electricity, maintenance and amenities charges and preferential location charges (premium view or floor-rise charges, etc.,” Kumar said.

Plot sales also offers quick monetisation of assets than regular real estate assets, said Amit Goenka, managing director at Nisus Finance. They, he said, offer affordability, quick sales, limited risks in project execution, faster approval process and turnaround as compared to the longer construction periods of housing or villa projects.

Value Appreciation

Appreciation of land prices is also seen as working in the favour of plotted development projects.

Land is always considered to have a healthy appreciation more than any other asset classes because of its averseness to market sentiment, said Murali Malayappan, chairman and managing director of Shriram Properties Ltd. “The land asset doesn’t depreciate, as it’s considered to have infinite useful life. Further, due to the scarcity of land, its tends to increase over time.”

Shriram Properties is offering plotted development services in Chennai and Bengaluru and plans to enter other cities soon.

Aakash Ohri, senior executive director of DLF Home Developers Ltd., cited recent research by a property analytics firm to point out that plots in phases 1-4 of DLF City in Gurugram have appreciated 229% on average during 2009-19. “Compared to any other asset class or investment, like gold or Sensex, the returns are far higher”.