Is buying land a good investment?
“Landlords grow rich in their sleep without working…” -John Stuart Mill.
One of the most common questions asked in the real estate market is – “Is buying land a good investment?”
Keep on reading to decide for yourself.
Real estate has proved to be one of the most fruitful and profitable businesses globally, including in Pakistan. When we talk about real estate, we do not only talk about houses and offices alone. One of the most common yet profitable real estate options that yield excellent returns is raw land.
Having said that, this blog brings you a concise yet informative presentation of things you need to know about buying raw land in Pakistan.
Advantages of investing in land in Pakistan:
Following are some of the significant advantages that come with investing in raw land in Pakistan.
Land comes with flexibility:
The land is a tangible asset that comes with a lot of flexibility. When you buy a readymade real estate property such as a house or a shop in a mall, you are limited and bound to the architect’s vision. In short, you cannot do much about the interior and design of the property.
On the other hand, when you buy a parcel of land, the options are unlimited. You can customize and revamp it according to your needs and personal preferences. You are indirectly investing in a blank canvas with many potentials and room for improvement when you invest inland.
When you construct your own house in Pakistan, you can quickly start it from scratch and add elements you are passionate about.
Low initial investment:
“Real estate investing, even on a very small scale, remains a tried and true means of building an individual’s cash flow and wealth.” -Robert Kiyosaki
One of the best things about land is that it comes with a low initial investment. As compared to readymade houses and commercial buildings, a parcel of land arrives at low prices. It is common in real estate that residential properties, even the cheapest ones, are more expensive than raw land. This is the main reason why people need more home loans to finalize their purchases. If you are a young investor who wants to secure your future, do consider investing inland.
It is a common trend in Pakistan that people purchase land early in life, waiting for it to mature. When the land value increases to a certain point, people sell off their land and use the money to buy a new home. Some people also build the house on the same parcel for land for investment or residential purposes.
The land also comes with a low entry cost. As mentioned earlier, vacant land in Pakistan is always cheaper than renovated properties. This means that investment in the land comes with low entry barriers.
According to Investopedia, land appreciation is an increase in the value of an asset with time. The growth happens for several reasons, such as increased demand, weak supply, changes in inflation, or interest rates.
One of the most lucrative features of raw land is that it always appreciates with time. It is seen that residential properties and land appreciates over time, but land appreciates much faster than residential property.
Minimum to no gap between purchase and possession periods:
When you buy a residential property, you have to wait for a certain period before moving into the house. For example, when you buy a home in a housing society still working on infrastructure, you might have to wait for weeks or even months before you finally get its possession.
Delays are scarce with a parcel of land because you do not have to wait for development completion. Also, land does not need renovations to take possession of its new assets instantly.
Property tax is a recurring cost that one has to bear regularly. One has to pay the tax in full regardless of whether they own a house or plot of land. However, it would help if you kept in mind as an investor that the property tax is lower than it is for a home. This tax difference means that one can save money when making initial deposits for land and also while paying taxes in the long run.
According to Investopedia, any cost incurred by people to keep their assets in good working condition is known as maintenance costs. These costs may be spent for general maintenance such as cleaning and painting of the property.
Talking about maintenance costs, it is seen that maintenance costs can be divided into various categories. Ongoing maintenance costs are recurring expenses that an owner has to incur regularly. These include costs like the maintenance fees issued by housing societies.
On the other hand, unplanned costs are the ones one has to incur on an irregular basis, such as plumbing issues, electrical problems, etc.
With the parcel of land, one does not have to worry much about maintenance costs. If you want to invest in an asset that requires minimum maintenance and regular upkeep, invest in a piece of land.
One of the essential benefits of land is that land is a finite resource. In other words, even if new residential developments are in process, there is only a limited amount of land available for ownership. This means that the demand for land will always be high, and land value will increase in future years.
Peace of mind:
Land is a tangible asset that is also long-term and very secure. Unlike jewelry, it is an asset that cannot be stolen or broken. The land is also an asset that does not depreciate or wear out over time. All these characteristics give you peace of mind. If you are interested in investing but do not want to indulge in something mentally challenging, investment in land is perfect for you.
Residential buildings such as apartments for sale in Pakistan, houses for sale in Pakistan come with a lot of competition. The market is fierce, and there are a lot of investors in the market. On the other hand, it is seen that land comes with little to no competition.
This happens because a piece of land can be altered in millions of ways, whereas readymade properties have characteristics made according to market needs and demands. Hence, the competition gets fierce.
Also, this is a common trend in real estate in Pakistan, according to which most real estate investors have their minds set on things like houses, apartments, and commercial property. A lot of people ignore the advantages of investing in land because it is a long-term investment.
These are some of the advantages of investing in the real estate market. Give this blog a read and understand the ins and outs of investing in land in Pakistan.
If you have any other questions or suggestions, let us know in the comment section below, and we will get back to you as soon as possible.