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How International Investment Fuels India’s Land Boom10 Key Factors That Influence Land Appreciation A Complete Guide for Smart Investors
Land remains among the strongest and safest asset classes because it naturally appreciates over time. But what makes the value of one piece of land shoot up while the other remains stagnant? The answer to this question can be found in understanding the basics of what makes land appreciate.
1. Location: The Eternal Value Driver
Location remains the best determinant of land appreciation. Land near cities, roads, commercial centres, schools, and hospitals commands higher prices due to its accessibility and high demand.
A "well-located plot" appreciates in value faster – always2. Infrastructure & Connectivity
Roads, flyovers, Metro lines, airports, expressways, and even the provision of basic services affect land prices significantly.
Better connectivity = easier life = greater appreciation.
Even the announcement of new infrastructure can push land prices upward before the project is undertaken.
3. Zoning and Government Approvals
The zoning by-law determines what land use can be allowed on the land, such as residential, commercial, industrial, agricultural, or a mixed
When land undergoes zoning or the level of its development appreciates, its value can increase exponentially.
Government policies, incentives, and guidelines ease the process.
4. Economic Growth and Population Increase
As cities expand, more jobs are created. This brings more people closer to major economic centres. This increases demand not only for housing, shopping, and services but also for land.
High Demand + Low Supply = Increased Value.
5. Neighbourhood & Social Infrastructure
Facilities located in the surrounding area are an important factor in the attraction of land:
- Schools
- Hospitals
- Consumer belts
- Retail
- Parks
- Cultural spaces
A well-built neighbourhood enhances livability as well as appreciation values.
6. Physical Features and Natural Resources
The natural qualities of the land affect the degree to which it is considered
Flat or raised ground:
- Hill views
- Water bodies
- Stable soil
- Scenic Surroundings
plots which have natural beauty or where it is easy to construct buildings usually entail higher charges.
7. Utilities & Development Readiness
Land equipped with:
- Water
- Electricity
- Sewage systems
- Internet connectivity
"Developable" land is regarded as being of greater value than "raw" or undeveloped land. This is because developable land causes fewer delays during the construction process.
8. Lack of Land Availability
"Land is a finite commodity, and when we deal with areas of high growth or regions with geographic constraints, the scarcity of land becomes the driving factor for land to be important."
Areas surrounded by hills, lakes, or already developed land appreciate in value at a higher rate due to the shortage of land.
9. Potential for future development
When large areas of land are available for the establishment of new enterprises, land prices soar.
New townships are planned.
Industries or IT parks are proposed.
Tourism zones start taking shape.
New expressways or metro lines are announced.
Smart investors study up-and-coming master plans and get in early to capture the long-term appreciation.
10. Market Demand, Trends & Timing
Land markets often have a tendency to move in cycles. Early entrants in emerging locations benefit from the steepest appreciation curve. Values go up if demand spikes due to lifestyle changes, migration, or investor trends.
Conclusion:
Whether you're the first one to buy property or a savvy investor, understanding these basics can allow you to discern plots that appreciate in value and make effective, future-oriented choices.
Maharashtra Government Introduces Vacant Land Tax for Asset Registration
One significant change is the requirement for property owners to submit payment receipts of vacant land tax or property tax for asset registration. This step aims to ensure that property owners fulfill their tax obligations promptly.Moreover, the government has made it mandatory to include the title owner's details in the adangal copy for agricultural land.
The decision to introduce these rules stemmed from observations that many vacant land owners were not paying taxes on time.Furthermore, urban and rural local authorities encountered difficulties in gathering vacant land taxes because they lacked a comprehensive database of property owners.
Local civic bodies and rural authorities have been urging the state government to provide details of land sellers and purchasers immediately after registration. This would facilitate tracking and collection of vacant land tax. However, technical constraints have hindered the government's ability to share this data.
The Maharashtra Government also revamped the property tax system in urban areas by transitioning from the annual rental value (ARV) tax calculation method to the capital value (CV) tax system. This change ensures uniformity in tax imposition on properties based on market value determined by the registration department. The reform aims to prevent irregularities in tax collection by revenue officials in urban civic bodies.
Previously, vacant land tax (VLT) was not mandatory for selling or purchasing property. To address this gap, the government now requires the submission of VLT receipts for the registration of open plots.
These measures underscore the government's commitment to promoting transparency, accountability, and fair taxation in property transactions. By implementing these rules, the Maharashtra Government aims to streamline property registration processes and enhance revenue collection for the welfare of the state.
When you're buying property, whether it's a house or just land, it might seem like they're the same thing, but there are some important differences to know about, especially when it comes to getting a loan. Let's break it down in easy terms.
Similarities:
- Doing Your Homework: Whether you're getting a loan for a home or land, the process is pretty similar. Lenders will check your background and finances before giving you the green light.
- Monthly Payments: Both types of loans usually involve paying a fixed amount every month, called an Equated Monthly Installment (EMI). And if you're applying with someone else, like a spouse, the rules are usually the same for both kinds of loans.
Differences:
- Location and Purpose: Home loans are for when you're buying a house that's already built, one that's being built, or if you're planning to build it yourself. Land loans, on the other hand, are just for buying land where you might want to build a house later.
- How Much You Can Borrow: This is where it gets a bit different. With a home loan, you can usually borrow a bigger percentage of the property's value, somewhere between 75% to 90%. But with a land loan, it's usually capped at 75% to 80% of the land's value.
- How Long You Have to Pay Back: Home loans usually give you a longer time to pay back the money, up to 30 years sometimes. But with land loans, you've got a shorter window, usually around 15 years.
- Tax Breaks: When you're paying back a home loan, you might get some tax benefits, like being able to deduct the interest you pay from your taxes. But with a land loan, you don't usually get those benefits unless you build a house on the land later.
Knowing these distinctions can simplify your decision-making process when deciding whether to secure a loan to purchase a home or acquire land.
Plot loans, also known as land loans, are an essential financial tool for individuals aspiring to own a piece of land. Unlike home loans, which are tailored for purchasing constructed properties, plot loans cater specifically to acquiring land for future construction purposes. Understanding the features, benefits, and eligibility criteria associated with plot loans can empower potential buyers to make informed decisions about their investments.
Features of Plot Loans:
- Loan Tenure: Lenders typically offer repayment periods ranging from 10 to 20 years, considering the borrower's repayment capacity and monthly EMI contributions.
- Loan-to-Value Ratio (LTV): Up to 80% of the plot's value can be financed by the loan, with the final ratio determined by the lender's credit risk assessment. Factors such as the plot's location, market value, and the borrower's credit profile influence this assessment.
- Tax Benefits: While the repayment of principal and interest components of the plot loan itself does not qualify for tax deductions, home loans taken for constructing a residential property on the purchased plot are eligible for tax benefits under Section 24 and 80C of the Income Tax Act.
- Balance Transfer Facility: Borrowers can transfer their outstanding plot loan amount to other lenders at competitive rates, subject to credit risk assessment by the new lender.
- Prepayment Charges and Processing Fees: Processing fees typically range from 0.25% to 1.50% of the loan amount. As per the regulations set by the Reserve Bank of India (RBI), prepayment charges do not apply to floating-rate loans. However, for fixed-rate loans, there is a possibility of these charges being imposed.
Benefits of Taking Plot Loans:
- Purchase of Residential Land: Plot loans enable individuals to acquire land for future residential construction, facilitating long-term investment and asset building.
- Attractive Interest Rates: Lenders often offer competitive interest rates on plot loans, making them an affordable financing option.
- Affordable Repayment Tenures: Flexible repayment periods ensure that borrowers can manage their loan obligations comfortably over time.
- No Pre-payment Penalty: The absence of pre-payment penalties on floating-rate loans allows borrowers to repay their loans ahead of schedule without incurring additional charges.
- Low Processing Fees and Minimal Documentation: Plot loans typically involve minimal paperwork and low processing fees, streamlining the borrowing process for applicants.
- Tax Benefits: Tax deductions on home loans taken for constructing residential properties on the purchased plot offer additional financial incentives for borrowers.
Eligibility Criteria for Plot Loans:
- Resident Indian: Applicants must be Indian residents to qualify for plot loans.
- Salaried or Self-Employed: Both salaried individuals and self-employed professionals are eligible to apply for plot loans.
Age Criteria: Applicants should fall within the age bracket of 18 to 65 years to be considered for loan approval.
The Tukde Bandi Kayda, or Land Holding Act of 2015, prevents the division of land into small pieces in Maharashtra and requires land to be consolidated. This law was enforced by the Maharashtra State Revenue and Stamping Department in July 2021. Earlier, the law did not allow the purchase of land in pieces smaller than 20 guntha. This caused problems for many people, such as difficulties in building homes, accessing roads for farming, and digging wells. However, on March 14, 2024, the government changed the law. Now, it allows the purchase of land in pieces as small as 1 to 5 guntha.
Key Points:
- Previous Restrictions: The law previously restricted the sale of irrigated land less than half an acre and non-irrigated land less than two acres.
- New Amendments: On March 14, 2024, amendments were made to allow easier land sales for specific needs like building homes or creating access roads.
- Permissions: Buyers now need the district collector’s approval, and the land must be used for the stated purpose.
- Farmers can purchase up to five gunthas of land to dig a well, and they must provide a certificate from the Groundwater Survey Department confirming the presence of water in the area.
These changes aim to resolve issues caused by small land parcels left after government projects and make land transactions smoother.
Can NRIs Buy Agricultural Land in India Understanding the Legal Landscape
In India, Non-Resident Indians (NRIs) may dream of owning a slice of rural paradise, but the legal path to acquiring agricultural land is filled with complexities and restrictions. Let's delve into the legal landscape to understand if NRIs can buy agricultural plots in India.
The Legal Prohibition:
First things first, NRIs are legally prohibited from directly purchasing agricultural land in India. This prohibition is enforced by the Foreign Exchange Management Act (FEMA). If an NRI attempts to buy agricultural land, it could lead to severe consequences like confiscation of the land and hefty fines.
Exceptions:
However, there's a glimmer of hope for NRIs who wish to own agricultural land. They are allowed to inherit agricultural land from their family members, providing an opportunity for NRIs to own rural property in India. Additionally, NRIs can acquire agricultural land as gifts from Resident Indians, though gifting between NRIs is not permitted.
Seeking RBI Permission:
There's a special provision where NRIs can seek permission from the Reserve Bank of India (RBI) to acquire agricultural land. This involves a detailed application process, demonstrating the necessity of the purchase and ensuring the land won't be used for speculative purposes.
Essential Documents for Transactions:
When embarking on property transactions, it's essential to have all legal documents in order. These include the Mother Deed, sale deed, legal heir certificates (for inheritance cases), tax receipts, and compliance certificates, among others.
Tax Implications and Benami Transactions:
Selling agricultural land involves navigating through various tax implications, especially capital gains tax. Additionally, NRIs need to be cautious about compliance with the Benami Act to avoid illegal transactions.
State-Specific Considerations:
Land laws vary across Indian states, with some requiring buyers to have a farmer's license or prove an agricultural background. NRIs need to be aware of these state-specific regulations when considering purchasing agricultural land.
Seeking Legal Counsel:
Given the complexities involved, it's advisable for NRIs to seek legal counsel to navigate the regulatory hurdles effectively. By adhering closely to guidelines from the government and the RBI, NRIs can ensure compliance and safeguard their investments.
While NRIs may have aspirations of owning agricultural land in India, the legal landscape presents several challenges. Understanding the regulations, seeking proper permissions, and ensuring compliance with the law are crucial steps for NRIs looking to venture into agricultural land ownership in India.
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