Investing in a Plotted Development

Plotted developments are the favourite investment for experienced real estate investors. A plotted development refers to a gated community or residential subdivision where people buy individual house plots (“lots” in the U.S.). In addition to subdividing the land, the developer is required by law to provide the roads, parks and utility connections for the plots.

It has recently become popular to also provide a clubhouse for the enjoyment of the residents, complete with swimming pools, gyms, sports facilities, etc. Plotted developments, sometimes also called “layouts”, are very attractive if the land title is good and the developer has a good track record of completion on time. These investments typically have a short execution time span of less than a year because most cities have a scarcity of such plots and the resale of the plots tends to happen very quickly.

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Key advantages

01 | Higher Appreciation:The rate at which a property’s value appreciates depends upon a) the appreciation in the underlying land value and b) inflation in the construction cost. The price of a plotted development has a higher ratio of land value to construction cost than apartments. Since the value of land appreciates faster than the increase in construction costs, investing in plots allows you to remove the slow growing aspect of your investment. This results in a much faster appreciation of your investment.

02 | Shorter Investment Duration:The project duration for plotted developments is much shorter than that of apartments because there is less construction needed. Therefore, an investor who buys plots at a discount can make a quick profit, thereby increasing his annualized returns.

03 | Flexibility of Investment Value:Plots usually provide a more flexible range of ticket sizes as opposed to apartments.A plot in a premium location can cost crores, whereas the same plot in an emerging location can cost you as low as a few lakhs. Apartment ticket sizes are much higher even in emerging locations, simply because of the construction costs involved.

04 | Higher Sales Velocity:Plots also have a much higher sales velocity and hence are easier to liquidate. This is especially the case with premium plotted developments in emerging areas with good connectivity to business hubs.