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Second home as an investment: Buying a Land vs Flat

Feb 05 2014, 16:41 IST
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SummaryThe second home buyer or investor normally falls into the dilemma when it comes to investing in land or an apartment.

The second home buyer or investor normally falls into the dilemma when it comes to investing in land or an apartment. Both the investments have some merits and demerits, but there are a few important points that can help an investor arrive at a definite stand.

Buying an independent land/floor means sovereign choice to build a house depending on one’s own requirement and constraints. On the other hand, a flat apartment is a redesigned, multi-floored construction. The apartment buyer has lack of freedom to change the shape and size of the construction area. However, it benefits in matters related to security, accessibility and location advantages.

No doubt a land has an advantage of assured returns, but it usually needs investment in full and there is no choice of taking leverage on the fund hence overall return is limited up to some level. Flats are very easy to buy and an investor can take leverage on its fund, in conclusion the return is also very good. The possession delay by the builder is a major concern in case of flat investment. Another big problem could be strengthening interest burden while one invests in multiple flats on a leveraged financial position at a time of slow-down in economy, however, the land investor doesn’t need to worry in such a situation.

Conclusion

To judge the best investment avenue between a land and flat, one should first focus on one’s own requirements. If the investor wants to use the property for the his personal use, then land could offer an advantage of usage flexibility and handsome value appreciation in long term. However, if the investor wants to resell the property after a short period then it is more profitable to take a position in flats. As an investor is not required to hold the flat for a long term, it also eliminates the depreciation factor. If the investor is a senior citizen or someone who cannot devote much time to maintain the property then again it is advisable to take the choice of a flat over land.

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