Investing in land and monetizing it for rental income can give a 10x higher yield compared to ready apartments, according to a report by Colliers’ Advisory Services
The report titled Top Investment Corridors in India says that wealth creation and the opportunity to diversify are reasons that are garnering interest from investors as by investing in land, there is a huge range of potential for monetization.
‘The investor could just hold the land for a long term, build a structure on it to lease out, have a holiday property and can earn pay-outs from there too,’ Colliers Advisory said in a statement.
When it comes to the key benefits that are influencing the investment sentiment, the report suggests that with well-chosen assets, investors can enjoy predictable cash flow, excellent returns, tax advantages, and diversification—and it’s possible to leverage Real Estate to build wealth. Real Estate investors generate income through rental income, appreciation, and profits generated by business activities that depend on the property.
‘Another factor is the high appreciation of land which is a lucrative proposition for investors to get better yields and returns, especially at a time when the rate of appreciation is much higher than it was a few years ago,’ it said.
Ways to Monetise Land
Investors can simply hold the land for a long term and gain from price appreciation. They can also lease out the land or build a holiday property to earn rental payouts from there. Many investors are also building weekend homes, which are rented out for better rental yield.
According to the report, there has been a spike in demand for investing in land at a nature-friendly location and across key tourism destinations.
‘Investing in land and monetizing it in rental format gives 10 times higher yield than ready apartments. There has been a spike in demand for investing in land at a nature-friendly location and across key tourism destinations. The concept of investment in serene locations has gained significant traction during the lockdowns and travel restrictions during the pandemic and is now on an upward trajectory,’ the report said.
‘The concept of investment in serene locations has gained significant traction during the lockdowns and travel restrictions during the pandemic and is now on an upward trajectory,’ it added.
While the the real estate investment market for land is still at a nascent stage of development in a few corridors, the growth rate of second homes or weekend homes in India is expected to grow multiple folds led by wide infrastructure projects planned and under construction across the states, according to the report.
Key Parameters for Land Investment
The report listed the following as key parameters that are driving investors’ interest in land:
Location is the most important factor in purchasing decisions for investors
About 70-80% of the investors expect to commute to their weekend gateway in a 2-4 hour drive.
About half of investors want their investment to be near elements like water bodies or Hill stations.
More than half of the investors prefer to build weekend holes and rent out the properties for better Rental Yield.
‘Better infrastructure, affordability, Higher rental yield, the scope of capital appreciation, tourist attractions, and proximity to the city centre are the key parameters while looking for any investments. These factors, together with the rising popularity of remote work and flexible work options, have contributed to making tourism destinations in India more attractive to investors,’ said Swapnil Anil, Executive Director and Head of Advisory Services at Colliers India.
‘However, the investors should also do their due diligence and carefully evaluate the risks and opportunities before investing in any specific region,’ he added.
