Many are attracted to land, given the possibility of handsome returns, while others keep away from it for fear of potential risks. Is the seller, the actual owner of the land? Will I have to deal with problems of encroachment, they ask themselves sceptically.
Seeing the spectacular appreciation in the value of a plot of land purchased by him in 1974 at Thoraipakkam in Chennai, septuagenarian RV Rajan swears by land investments. “Beg or borrow but do buy a piece of land,” says Rajan, a veteran ad man and a rural communications specialist. Similarly, Kumar, who works with a private company, is all for land purchases. Sale of nearly one ground of land on the Old Mahabalipuram Road in Chennai fetched him several times of what he had spent on it six years ago. There are others too who echo the views of Rajan and Kumar.
“Once you look at the meagre post-tax returns from a bank fixed deposit after accounting for inflation, land investments begin to make a lot of sense,” says a city-based businessman and veteran land buyer, who does not wish to be named. Reiterating his unshakable faith in land, he adds, “While the value of a flat would go down after 10-15 years as it wears out, land only appreciates in value in the long run.”
But, investing in land is not as easy as it sounds. Land purchases have their pitfalls too and one needs to exercise much caution in such dealings. While Kumar has been lucky not to face much trouble, others have had their share of not-so-pleasant experiences. That has, however, not weaned them away from buying land.
All’s well that ends well
Rajan was 32 when he moved to Chennai in 1974. Nudged by friends, he borrowed money from the Employees Provident Fund and bought 9,600 sq feet of land in Thoraipakkam, off the Old Mahabalipuram Road (IT corridor) in Chennai. “I had no plans of building a house and simply bought the land for the purpose of investment. I had no idea on where to buy land and chose Thoraipakkam as it was close to where I was staying, making it easy for me to inspect the land,” says Rajan. “It’s another matter that many a time I couldn’t even locate my plot when the area got flooded!” adds Rajan. The plot did not appreciate much in value for many years as it was located in a low lying area. But, all began to change in the early 2000s with the initiation of the IT Corridor Project by the Tamil Nadu Government. The value of the plot multiplied exponentially. Rajan even had to ward off goons who were eyeing his plot. Thankfully for him, the matter was amicably resolved and he was able to fence his plot and put up a ‘not for sale’ board.
In 2008, he divided the land among his children, giving them three-fourths of it and keeping the rest for himself. About two-and-a-half years ago, his children decided to go for joint development with a real estate builder, who constructed 12 flats, four of which were given to him and his children.
Rajan is satisfied with the way things have turned out and is happy that he did not give in to the temptation of selling the plot earlier. “Every time there was a wedding in the family, I was tempted to sell off the plot but I somehow managed to hold back,” says Rajan. He stays in an independent house in Sastri Nagar, built on a plot that he bought along with his sister in 1980. “I didn’t make much money from my business but I’m comfortably enjoying my retirement, thanks to my land purchases,” says a content Rajan.
Kumar too has had it good with investing in land. Encouraged by the healthy returns on a land sale a few years ago, he invested in a developing hub in the outskirts of the city. “With many automobile companies setting up shop here, this is an upcoming area,” says Kumar. But unlike Rajan, he has no plans of building a house. “I’m buying land purely for investment,” says Kumar.
Beware of fraudsters
“But you need to run many checks before buying a plot of land,” cautions Kumar, who believes in thorough research before zeroing in on an area. To start with, you need to find out whether the seller is genuine. So, you must visit the plot a few times before buying it and also make enquiries with the neighbours. He also recommends against going alone and believes that it helps to have some other people too purchasing plots from the same buyer. That way, you are better prepared to tackle any problems that may arise. Also, you can take turns in keeping an eye on the plots.
“One must also seek legal advice on the property purchase, before going ahead with it,” warns Kumar. Rajan too offers similar advice.
“You should not make the full payment unless you are handed over the sale deed and the patta. To satisfy yourself of the authenticity of the sale deed, you can match it with a copy of the document at the registration authority’s office. Apart from this, you must also go through the encumbrance certificate for the land for the past 30 years,” adds the industrialist. The certificate, which can be obtained from the registration authority’s office, shows whether the property is free of any legal dues (such as a loan raised against the property). Recounting an unpleasant experience, the industrialist says, “A company tried selling me a plot of land that it had pledged for raising a bank loan. Keeping the bank in the dark about its true intentions, the company fraudulently managed to get the property documents released from the bank to present them to me. But, later the bank began pestering the company officials for the documents. In their attempt to retrieve the documents, they lied to me that the property papers had to be shown to some government official. But, I was beginning to get suspicious of their intentions and refused to part with them. Finally, the company gave in and I was able to get ownership over the land.”
Always on the alert
The due diligence does not, however, end with the purchase itself. You have to be on your guard even afterwards. “You must make regular visits to your plot to ensure that there is no encroachment,” says Kumar.
“While there may be no visible encroachment on your land, you must apply for the encumbrance certificate once in every one-two years to ensure that the land is still in your name,” advises Rajan. “Land is the best investment that you can make for your children and grandchildren. Keep it for at least 10 years but make sure it is well guarded,” adds the industrialist.