Buying a plot of land can prove to be a great investment option as plot prices are always going to increase in future at some point of time. However, although at times the plot prices will seem to be quite attractive, with easy payment options, there are often many risks associated with it. The complexities of buying a plot are in fact greater than buying a finished apartment and here are some things that one needs to check out.
- One of the first things to ask about is that is the land you are investing in under the name of any builder or developer? Hence, does the builder have the legal rights to sell the land in the first place? It is important to not only find out about the present owner of the land, but review the past transactions of the land as well. How did the builder come to posses the land? Did the person he bought it from had similar legal selling rights? Often, there are shady transactions with plots at some point of time and the problems associated with them are not immediately perceivable, which is why it is important to dig for information about the past owners of the plot as well.
- The next thing is to find out about is whether the person you have taken it from taken any bank loan. Builders often buy plots for residential scheme with loans from bank but sell it off when they see a more prospective land. But if there is a loan, then it would at least indicate that the plot has been properly searched as banks never give a loan against disputed or shady assets. So, much is to be said if there is a bank involved in the process and at least the verification aspects would be taken care of.
- Next, one should also enquire whether the plot has an NA Order or not. For example, in India, all the land is designated as Agricultural Land, unless it has been specifically designated for some other purpose by the government. The NA means Non- Agricultural Land and your plot should have this if you are thinking of making any kind of construction on it. Agricultural plots are only meant for the said purpose so that if you try to make any other construction on it, you need to transfer it to NA land with government order, or the construction on it will be deemed illegal. It is also important to particularly designate your land for residential construction purpose because NA land can also be used for commercial purposes, construction of warehouses, resorts, industrial purposes etc. Hence, one has to look for a NA- Residential plot to make a home.
- In continuation, it is also important to find out if the seller is trying to sell you a plot under the Proposed NA Scheme. It means, they will say that the process of converting the Agricultural Land into a Non Agricultural one has started and that the process is going to be resolved very soon and that the papers are already drawn. Once they are through, the buyer will be able to sell the land at a very high price. Well, more often than not, these are just schemes to lure the buyer and sell an agricultural land and unless the buyer is into agriculture, this will of no use to him, or the entire responsibility of changing the Agricultural land into a NA land will rest on the buyer. But that hardly ever happens, and the entire investment fails because such a conversion process is extremely time consuming and lengthy and could take up to 10 to 15 years. It is important to note that NA plots with clear titles in the suburbs and out of the city are very rare, so if you are looking for land in such places because the prices are low or you want to build a vacation home or something, look again.
- The other thing one needs to look into is that what the FSI for the plot is. FSI is the Floor Space Index, which means, the amount of construction that can be done on a piece of land. This largely depends on the location of the plot and whether there are other constructions around it, and the nature of those constructions. Usually, plots have 60% to 75% FSI, meaning construction can be done only on that percentage of land of the entire plot. FSI on agricultural land is very low as well and only about 4% to 10% of construction is allowed on it.
- If you are buying a plot from a builder, do go for a background check of the builder. Find out about his past constructions, whether any of them have ever been in legal disputes and whether his past clients are happy with him and his quality of work. For a builder who has a clean record, it is unlikely he will easily go in for fraudulent activity and it could be that is law abiding and the plot of land checks all the correct boxes.
- It is also important to find out from the builder when the sale deed is going to happen. Normally, one will have to pay about 30% as down payment for the transaction of a plot, but it varies. An Agreement to Sale does not mean that the buyer actually owns the land, but it will only highlight the terms and conditions on which the sale will take place in future. So do not automatically assume that you are the owner of the plot just because you have signed the sale agreement but see through the process till the registration is done and the Sale Deed is signed.
- Before investing in a plot, it is also important to find out about the maintenance that will go into retaining it and the costs you have to pay to bring certain amenities to the land. The farther you are from the city, the more difficult it is going to be, so it is prudent to calculate these costs before making the investment.