Across the world, throughout civilised existence and regardless of all other commodities, people have always placed great value on owning land and gold. Land has the unique distinction of being the basis of sustenance by providing the means for food and shelter. With the volatility in the financial world with currencies themselves fluctuating with the market and trading commodities, stocks and shares posing great risks, the one investment with a sustained long term value is real estate.
In real estate, even while speculators exist, the scope for speculative trade on land is a far longer proposition than with most other commodities that can be traded in hours and days. Of all cities in India, it is widely reported that Chennai’s real estate industry is least affected by speculation and hence has been a strong market despite the global meltdown in the last couple of years. An essential reason for this is that Chennai is an end-user driven market and one that focuses on utilisation of land and property, with great value and emphasis placed on owning a home by its populace. These factors along with the extension of the city’s metropolitan area, the creation of a wider connectivity network including the arterial ring roads and the Metro can only mean that real estate here is bound to boom after the passage of the next 24 months. It is in this period that when the price is still right and if one has the means; it is wisest to invest in property for gaining maximum returns after a period of three to five years.
When considering real estate for investment, one can purchase land or buildings. Generally the drive has been to buy a built apartment or commercial space that comes along with a portion of undivided share of land associated with it and shared by all the other owners of the building’s space. However, if not the end-user of a built space, there are various factors to watch out for including the expenses involved with maintenance of a built property. While the long term dividends of a built space are assured, it is based on the premium on the land and not necessarily on the building. Therefore, unless the location of a built property is premium enough to attract an assured rent that takes care of maintenance and any EMI’s, one must be careful and consider use of the space and for how long they would like to retain the property when buying purely for investment. However, with a shortage of good housing and high demand for residential space across Chennai, projects by reputed builders are good investment and will never be a loss making proposition.
The highest returns on investment are however on land. While buying land within central areas of the city is near impossible with valuations in crores, there are a variety of opportunities in land investments in suburban areas fringing the city. A large number of layouts, gated communities and township projects are situated across the metropolitan region and adjacent to the different highways that radiate out from the city. Most popular areas that see maximum development are those that lead from East Coast Road (the belt between Chennai and Puducherry), IT Expressway-OMR, GST Road (between Tambaram and Chengalpattu), Vandalur-Oragadam Expressway, Chennai-Bypass, Chennai-Bengaluru highway and the Chennai-Kolkata highway. There are reports from investors that land prices have gone up exponentially in the last ten years, as much as 10 times over the original prices of sale less than a decade ago. Due to a great scarcity of good land, the value can only be expected to grow over time.
This being said, what kind of land must be bought? What are the factors that make it desirable? Every property is said to be unique and anyone buying a property must consider the usual aspects that include approach, passage to the land, water availability, location, size and shape of the land. Additionally, the ownership, legality, land documents (mother documents, Patta, Chitta, Encumbrance certificate etc) must all be in order. But in addition to these general things, there are additional factors that will determine the usability of land and development potential. Since most land was originally used as agricultural or pastoral land, it is essential to first see what kind of zone the land is situated under. In agricultural land, there are two types termed dry land (punjai) and wet land (nanjai). The distinction between the two is whether the land is connected via an irrigation system or not and is important in that nanjai or wet lands are strictly to be conserved for agriculture (by Supreme court order and a central government directive passed in January 2011) unless a No Objection Certificate (NOC) for building, residential layout or mixed development is issued by the collector’s office. A dry land however can be easily converted into a variety of uses and is best for any layouts or township projects.
Similarly, a common issue in Tamil Nadu is the fragmentation of pieces of agricultural land into small pieces or held by families without proper infrastructure or access. It is to avoid all of these hassles that it is easiest for someone to buy land in an approved layout. Developers usually overcome these difficulties by creating land parcels in appropriate pieces of land and demarcating them into plots with clear frontage and access. However, it is important to understand what kind of layout one is investing in and that there are many kinds of layouts and many kinds of approvals in place. These will determine not only the use of land, but even the scope of investment.
A large number of investors prefer apartments or built space because it is easier to be funded by a bank loan for the purchase. But, in layouts that are approved by the correct authorities and eligible for bank loans, it is possible to apply for loans on properties. Who does not dream of owning a piece of land, an independent house or even a small orchard with a farm cottage? It may be easily possible with the right approach and understanding of the different types of layouts that are created. It is important to distinguish between genuine developments and those that claim to be too good to be true. A term that is thrown about is that the plots are “approved”, if so there are distinguishing factors between various types of approvals and types of layouts sanctioned in Tamil Nadu. When estimating the investment and returns, or envisaging future uses such as building a home there, this is of paramount importance. If all of these factors work and the price is right, its time to remember there is no greater joy than being able to stand on your own soil.
Source: Times Property in The Times of India, Chennai