Buying Plots Yield Better Returns Than Investing in Apartments: Housing.com

Plots in Hyderabad, Bengaluru & Chennai saw the highest return among top eight cities 

Residential land is still a better investment than buying apartments - the latest research by Housing.com shows that plots generated higher capital returns in India.

Research by the REA India owned leading full stack digital real estate platform Housing.com, found that prices of residential plots appreciated by 7 per cent (CAGR) annually since 2015 across eight major cities, while rates of apartments grew by 2 per cent (CAGR) annually during this period.

"Residential plots have been able to generate higher returns on investment. One of the reasons could be the limited supply of plots in big cities because of paucity of large land parcels in the city," said Mr. Dhruv Agarwala, CEO, Housing.com, Makaan.com and PropTiger.com.

"The demand for plots and independent floors have come back strongly during the COVID-19 pandemic. Developers are trying to meet this rise in demand by launching such projects on the outskirts of big cities," Agarwala said.

In eight major cities -- Delhi-NCR, Mumbai, Pune, Bengaluru, Hyderabad, Chennai, Kolkata and Ahmedabad, people generally prefer to buy apartments than plots. The reasons behind the popularity of flats are security and common amenities like power backup, car parking, club, gym, swimming pool and garden area, among others.

Despite higher demand for flats in these eight cities, the current and historical trends suggest that plots comparatively have higher returns than other residential assets.

Ms. Ankita Sood, Head of Research at Housing.com, Makaan.com and PropTiger.com said, “We see key localities in Gurugram and the southern sisters comprising of Hyderabad, Bengaluru, Chennai recording double-digit growth in prices for residential plots especially post 2018. Where prices for land in these cities grew in the range of 13-21 percent in the last three years, apartment prices have remained range bound (2-6 percent). Positive sentiments induced by policy changes and the pandemic will further fuel this demand in coming quarters.”

Southern cities leading in demand for residential plots

During 2018-2021 period, Hyderabad witnessed the maximum price appreciation in plots at 21 percent compounded annual growth rate (CAGR).

Shankarpalli and Patancheru in the West and Tukkuguda, Maheshwaram and Shadnagar in the South were top locations in Hyderabad in terms of both demand and price appreciation in 2021.

In Chennai, the rates of residential plots prices grew at a CAGR of 18 percent between 2018-2021. Last year, Ambattur, Avadi and Oragadam, Sriperumbudur and Thaiyur witnessed maximum price appreciation in Chennai.

The residential land prices in Bengaluru increased at a CAGR of 13 percent between 2018-2021.

In the IT city, northern micro markets such as Neelmangala, Devanhalli, Chikballapur, in the North, Hoskote in East, followed by Kombalgodu in the South, were major destinations for residential plots.

Gurugram shines in the North:

In the Gurugram market in Delhi-NCR, the prices for residential plots grew by 15 per cent (CAGR) between 2018—2021. The land prices in Sohna, Gurugram grew by 6 per cent (CAGR) during the same period. 

Sector 99, Sector 108 along Dwarka Expressway, Sector 95A in New Gurugram and Sector 70A and Sector 63 were major destinations for residential land in Gurugram in both demand and price appreciation in 2021.

In Sohna, Karnki, Sector 14 Sohna and Sector 5 Sohna were prominent localities last year.

The supply of plots in Gurugram is high because of policy-based initiatives by the Haryana government.