Lucrative Land Investment Opportunities In India

Investing in land in India can be a profitable venture, but it is also a risky one. The key to making a successful investment is to choose the right location. Locations with great growth potential or upcoming areas are ideal bets when purchasing land. Affordability, connectivity, and industrial growth are key factors to consider.

- Hoskote, Bangalore: Termed as Neo Bangalore by real estate developers, Hoskote is about 25 kilometers from the city center. It is close to Whitefield, the IT hub of Bangalore, and offers land availability at a reasonable price per square foot.

- Wagholi, Pune: Wagholi is a town located on the Pune-Nagar highway and is well-connected to IT parks. It is an industrial belt with many call centers and BPO companies nearby. The price for a residential plot in Wagholi is very reasonable.

- Kundrathur, Chennai: Kundrathur is an upcoming real estate hub on the outskirts of Chennai. It is located close to the Chennai-Bangalore highway and has become a fast-developing residential area. Kundrathur has seen high demand for plots due to its well-established infrastructure and connectivity through public transport.

- Rajarhat New Town, Kolkata: Rajarhat New Town is a satellite city located on the outskirts of Kolkata and is an IT and residential hub. It is estimated to be three times the size of Salt Lake City and offers a 10.5-kilometer Wi-Fi zone. The infrastructure is well-planned, and IT firms such as HP and IBM have established their offices here.

- Adibatla, Hyderabad: Adibatla is a village close to the outer ring road of Hyderabad. It is home to many IT firms and Tata's Aerospace SEZ. Adibatla has good connectivity to the airport and the city center.

The benefits of investing in land

Investing in land in India has long been a popular option, despite the emergence of other financial products such as mutual funds and equity shares. Here are some of the benefits of investing in land:

Limited Supply, Ever-Increasing Demand

The supply of land is limited, and with the exception of a few reclamation cases, it is impossible to create more. As a result, the demand for land continues to rise, pushing up prices. This continuous demand also ensures that land prices remain relatively stable compared to other assets like gold and equity.

High Returns and Resale Value

As the demand for food and agricultural produce increases, the value of agricultural land tends to appreciate over time. Advancements in farming techniques and technology also present opportunities to enhance productivity and yield, thereby increasing the income generated from the land.

Agricultural land is a finite resource, and its availability is limited by population growth and urbanization. The conversion of agricultural land for non-agricultural purposes further reduces its supply, driving up demand and increasing its resale value.

Diversification of Investment Portfolio

Agricultural land provides an excellent opportunity to diversify an investment portfolio beyond traditional options like stocks or real estate. Adding this asset class reduces risk, acts as a hedge against market volatility, and offers long-term growth potential.

Tangible Asset with Multiple Uses

Agricultural land is a tangible asset that can be used for farming, cultivating organic produce, setting up agribusinesses, or even exploring eco-tourism ventures. This versatility allows investors to adapt to changing market dynamics and explore different income streams.

Agricultural land is also often sought after for non-agricultural purposes, such as industrial development, commercial projects, and real estate, which further increases its resale value.

Tax Benefits and Government Support

The Indian government recognizes the importance of agriculture and provides various tax benefits and incentives for agricultural landowners. These include exemptions on income from agricultural activities, subsidies for irrigation and equipment, and favourable financing options for agricultural projects. These incentives foster a positive environment for agricultural investments and enhance the financial advantages for investors.

Positive Social Impact

Investing in agricultural land contributes to the social well-being of rural communities. It promotes employment opportunities, stimulates economic growth in rural areas, and helps improve the standard of living for farmers and their families. By investing in agricultural land, you not only gain financial benefits but also support the backbone of India's economy and promote sustainable development.

The risks of investing in land

While investing in land can be a good idea, there are several associated risks that you should be aware of. Here are some of the key risks to consider:

High Investment and Illiquid Asset

Land is a big-ticket investment, requiring a substantial amount of money upfront. It is also an illiquid asset, meaning that it may take a long time to dispose of the investment if you need to encash it quickly. In some cases, the sale process can take years, defeating the purpose of the initial investment.

Risk of Encroachment and Acquisition

There is always a risk of encroachment on your land, which can lead to litigation and unnecessary legal costs. These auxiliary expenses can sometimes outweigh the appreciation of the land's value. Additionally, there is a risk of the government taking over the land through compulsory acquisition, and the compensation received may not be satisfactory.

Non-availability of Finance

Banks and financial institutions typically do not lend money specifically for the purchase of land. They may offer composite loans covering the cost of the plot and construction, but only if you plan to build a property on the land. This can make it challenging to secure funding for land purchases.

Lack of Tax Benefits

When investing in land, there are generally no tax benefits available for interest payments or principal repayment, unlike with home loans, where you can claim tax benefits under certain sections of the Income Tax Act.

Raw Land May Not Generate Income

Buying raw, undeveloped land is a speculative investment, and it may not generate any income. There is also no guarantee of a capital gain when the property is sold. As a result, investing in raw land can be risky, and it may not provide the expected financial returns.

Due Diligence and Legal Issues

Investing in land requires extensive due diligence, including checking for permits, land-use restrictions, easements, and other legal specifications. Failure to conduct thorough research can lead to unexpected issues and impact your ability to utilize the land as intended.

Limited Utilities and Infrastructure

When purchasing land, it is essential to consider the availability of basic utilities such as electricity, water supply, and telecommunications. A lack of access to these utilities can hinder your ability to use and develop the land. Additionally, it is crucial to review the property's annual property tax obligation and its distance from the nearest community.

The best locations to invest in land

Land investment in India is a profitable venture, given the limited availability of land and the increasing demand for it. The key to making successful land purchases is to choose the right location. Locations with great growth potential or upcoming areas are ideal bets. Factors such as affordability, connectivity, and industrial growth are essential when deciding where to invest. Here are some of the best locations to invest in land in India:

Hoskote, Bangalore

Known as "Neo Bangalore" by real estate developers, Hoskote is a taluk in the Bangalore Rural district, located about 25 kilometres from the city centre. Hoskote is sought after for its land availability and reasonable prices. The area is close to Whitefield, the IT hub of Bangalore, and has good infrastructure. The price for residential plots ranges from Rs. 1,090 to Rs. 1,893 per square foot. Several real estate developers have started projects in the area, indicating further growth potential.

Wagholi, Pune

Wagholi is a town located on the Pune-Nagar highway and is well-connected to IT parks. It is an industrial belt with many call centres and Business Processing Outsourcing (BPO) companies nearby. The per-square-foot price for a residential plot in Wagholi is very reasonable, ranging from Rs. 799 to Rs. 1,100. The area has good infrastructure, and the proposed flyover from Shikrapur to Wagholi will further improve connectivity.

Kundrathur, Chennai

Kundrathur is an upcoming real estate hub on the outskirts of Chennai. It is located close to the Chennai-Bangalore highway and has become a fast-developing residential area. The famous Kundrathur Murugan temple is situated here, and there is no water supply problem due to the nearby Chembarambakkam Lake. Kundrathur has seen high demand for plots recently due to well-established basic infrastructure and connectivity through public transport. Plot prices in Kundrathur range from Rs. 1,409 to Rs. 2,296 per square foot.

Rajarhat New Town, Kolkata

Rajarhat New Town is a satellite city located on Kolkata's outskirts and is an IT and residential hub. The area is being developed in the city's northeastern parts and is expected to be three times the size of Salt Lake City. It has a 10.5-kilometre Wi-Fi zone and is India's first road with Wi-Fi connectivity. The infrastructure is well-planned, and IT firms such as HP and IBM have established offices here. The new town is close to the airport and offers good entertainment options. The price of plots ranges from Rs. 3,460 to Rs. 5,100 per square foot.

Adibatla, Hyderabad

Adibatla is a village in the Ranga Reddy district of Telangana, close to Hyderabad's outer ring road. Many IT firms, including TCS, have offices near this area, and Tata's Aerospace SEZ is located here. Adibatla has good connectivity to the airport and other parts of the city. Plots are available starting from Rs. 800 per square foot.

Mokila, Andhra Pradesh

Mokila is a potential realty destination located near two important IT hubs, Gachibowli and Kokapet. This area is allowed for construction within a 20-kilometre stretch west of Kokapet, which falls under a bio-conservation zone. Around 10 developers are selling residential plots ranging from Rs. 3,500 to Rs. 5,000 per square yard. The area has good infrastructure, including schools, hospitals, and a new mall.

Dholera, Gujarat

Dholera is a port town located 120 kilometres south of Ahmedabad and is the first notified Special Investment Region (SIR) in Gujarat. The area has been earmarked for industrial and commercial activities, and several companies have shown interest in developing projects. The area will also see massive development, including a new international airport, an expressway, and a metro rail link. Plot sizes vary from 200 to 1,000 square yards, priced from Rs. 1,800 to Rs. 3,500 per square yard.

Ravet, Maharashtra

Ravet is located 25 kilometres northwest of Pune and is known as the "Gateway to Pune." It is strategically placed between the Hinjewadi IT park and the Pimpri-Chinchwad industrial belt. Property prices in nearby areas have shot up, but Ravet remains more affordable, with rates ranging from Rs. 1,200 to Rs. 1,500 per square foot. Several developers have acquired land in Ravet, and investors can still buy residential plots in the vicinity.

Narasapura, Karnataka

Narasapura is a village located 52 kilometres east of Bangalore and is close to the Bangalore International Airport and the IT suburb of Whitefield. It is on course to become a major hub, with several automakers planning to set up factories. Led by Honda Motorcycle and Scooters India, some 22 companies have already acquired land in Narasapura. Land prices are expected to increase substantially as these units start operating.

The types of land available for investment

There are several types of land available for investment in India, each with its own unique characteristics and potential for development. Here are some of the key types of land that investors can consider:

• Residential land: This type of land is typically purchased by independent buyers who intend to build a house on it, either for their residence or to rent out to tenants. Real estate developers also acquire residential land to construct new housing projects, such as apartments or flats, for sale.
• Commercial and industrial land: Commercial and industrial real estate developers buy this land to develop projects such as commercial buildings, complexes, factories, and warehouses. Instead of selling it off, they often lease the land to generate income more consistently.
• Agricultural land: Agricultural land is used for farming and growing produce, contributing significantly to India's GDP. In some cases, landowners may seek to convert their agricultural land for non-agricultural use, subject to approvals and adherence to land-use regulations.
• Freehold land: This is the most common type of land available for sale in India. Investors must obtain approval for the type of property they plan to construct, be it residential (e.g., house or apartment building) or commercial.
• Leasehold land: This type of land is typically a large area owned by the government or specific authorities. It is leased to buyers for long tenures, but the land can only be used for the specific purpose approved by the authorities.
• IT, hospitality, and healthcare zones: Certain land zones are dedicated to specific sectors, such as information technology, hospitality, and healthcare. For example, land in an IT zone will be used to develop an IT knowledge park or hub.
• Special Economic Zones (SEZs): These zones are designed to facilitate trade and economic growth, often providing tax incentives and other benefits to businesses operating within them.
• Eco-sensitive and reserved lands: These lands are meant for environmental preservation and conservation, playing a crucial role in protecting India's natural resources and ecosystems.

When considering land investment in India, it is essential to understand the diverse applications of land ownership and to have a clear investment purpose. Additionally, factors such as location, infrastructure development, connectivity, and demand and supply dynamics will influence the potential for land appreciation and the overall success of the investment.

The future of land investment in India

Land investment in India has always been a popular choice due to its scarcity, tangibility, and versatility. It is a relatively safe investment option, with a history of significant appreciation, and continues to be in demand, especially in the post-pandemic era.

Factors influencing the future of land investment in India

Economic growth and urbanisation

The growth of the national economy and the resultant urbanisation will continue to amplify the demand for real estate, including land. This will be driven by the rising middle class in India, whose aspirations and increased disposable income will lead to migration from rural to urban areas.

Infrastructure development and connectivity

The development of social infrastructure such as schools, hospitals, shopping malls, entertainment venues, and efficient connectivity to other regions will continue to be important factors influencing land investment decisions.

Scarcity and increasing demand

The availability of land, especially in metro cities, is limited and will continue to decrease due to ongoing infrastructure projects. This scarcity, coupled with increasing demand, will drive up the value of land over time.

Types of land investments

Residential developments

Residential land is purchased by independent buyers intending to build a house, either for personal use or to rent out to tenants. Real estate developers also buy residential land to construct housing projects for sale.

Commercial and industrial ventures

Commercial and industrial real estate developers buy land to develop projects such as commercial buildings, factories, and warehouses. They often lease the land to generate consistent income.

Benefits of land investment in India

Land investment in India offers several advantages, including:

• Low maintenance and upkeep costs
• Flexibility in usage
• High appreciation potential
• Less competitive market
• Lower investment and post-investment expenses compared to developed properties

Risks and considerations

While land investment in India has strong potential, there are some risks and considerations to keep in mind:

• Raw land investment may not generate income and may not yield capital gains when sold.
• There are legalities, land-use restrictions, and other factors to consider, such as access to utilities, property taxes, and trespassing violations.
• It is important to understand the practicality of owning land and the specific types of land-related investment options available.

Land investment in India offers a unique opportunity to own a scarce resource with high ROI potential. With the right strategy, a clear understanding of the market, and careful consideration of risks, investors can make well-informed decisions and reap the benefits of this timeless investment choice.

Frequently asked questions