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Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

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Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

Last updated: June 27 2014
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  • Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

    Hi guys,
    Is it wise to invest in plots lesser than a ground (like 1200sqft or 1800sqft)?
    This is purely for investment with the hope of selling in 5-10 years.

    The major disadvantage I see in investing in small plot is that buyer in future is unlikely to be a builder, since one cant construct a flat in less than a ground. So, my buyer pool in future will be mostly people who want to buy it for constructing an indep house(which might restrict the buyer pool by a lot). But maybe there are some buyers who can build 3-4 2BHKs or something.

    Due to my budget(60-70L) I can't afford 1 ground plots in areas like Pallikaranai, Iyyappanthangal, Mugalivakkam etc. I didn't look at extended suburbs yet where I can afford 1-2 grounds depending on the location. Would that be a better option instead? I didn't look at far off places, since I ideally don't want to hold the plot for more than 5-10 years(selling in 5yrs would be ideal) and hence thought would stick to something closer to city. My assumption is that the plots closer to city are relatively a safer bet (atleast better than inflation) compared to plots at unheard locations .

    Wanted to hear your thoughts on advantages/disadvantages of buying smaller plots and also investing on a small plot closer to/in the city vs investing in far off places.
    Finally if you were me, what options would you look at ?

    Also should I even be bothering at investing plots since my investment horizon is short?
    I won't be going for a loan and plan to transfer the money back to US when I need.
    Last edited June 24 2014, 04:33 AM.
  • #2

    #2

    Re : Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

    Don't go for small plots anywhere.

    But if you plan to take back to US then say your investment if doubles in areas like Palli. then assume in 5 years Indian rupee goes down by 15 percent then you loose close to 25% so your gains in dollar will be about 70%.

    Comment

    • #3

      #3

      Re : Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

      You can take a look at some of the layouts that are discussed here like Ponmar, Amir Nagar, other nagars and bakkams. Since yours is short term keep part of investment in hyped layouts.
      Split your investment, pray that it does not turnout like MWC, Oragadam, spdur, etc.
      Make sure you do not get cheated, double docs, bad plots, etc.
      Pray that rupee stays at the same value or close to what it is now.
      Hope that you can liquidate it easily at good price, without going through hassles by brokers.

      Don't forget to keep us posted on the results.

      Take a bet. Get in the game.
      It is slow market, who know may be you could make money.

      Comment

      • #4

        #4

        Re : Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

        RG -
        If the money is in india already you have to find a vehicle to beat both inflation and currency deval if you ever want to take money back to US
        Taking it back is not simple, it requires you to declare it yearly using the FBAR - form - June 30th deadline for this year.
        Also the realized profits must be in WHITE to be declared and taken back at 175k USD a year per person.
        if that person is you, then the investment source must be declared in US and returns you made will be taxable in US as well ( like any other capital gains).
        As you can see this can get pretty complicated, the other option is to invest it on some one behalf and they gift it back to you then you back to US.
        So i suggest think through and talk to a CPA, where i live i have folks who frequently sell land in Vizag, Vijayawada, Chennai and bring cash and buy full cash houses in locations that rank at the highest earning zipcodes in the country. its a very normal thing, but you need the right vehicle and mechanism to do it.
        So suggest do that home work first before you look for the type of plot to invest

        Comment

        • #5

          #5

          Re : Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

          Originally posted by k11 View Post
          Make sure you do not get cheated, double docs, bad plots, etc.
          Yeah, this is a big problem with plots - esp, in far off places which has more chances of encroachment if not monitored well.

          Pray that rupee stays at the same value or close to what it is now.
          Hope that you can liquidate it easily at good price, without going through hassles by brokers.

          Don't forget to keep us posted on the results.

          Take a bet. Get in the game.
          It is slow market, who know may be you could make money.
          Yeah, for a 60L investment, I would get 92L in 5 years on a 9% NRE FD investment which is also tax free. If I can't sell the plot in 5 years for 1C, it's not worth the hassle.

          Comment

          • #6

            #6

            Re : Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

            Originally posted by SRaj001 View Post
            RG -
            If the money is in india already you have to find a vehicle to beat both inflation and currency deval if you ever want to take money back to US
            Taking it back is not simple, it requires you to declare it yearly using the FBAR - form - June 30th deadline for this year.
            Also the realized profits must be in WHITE to be declared and taken back at 175k USD a year per person.
            if that person is you, then the investment source must be declared in US and returns you made will be taxable in US as well ( like any other capital gains).
            As you can see this can get pretty complicated, the other option is to invest it on some one behalf and they gift it back to you then you back to US.
            So i suggest think through and talk to a CPA, where i live i have folks who frequently sell land in Vizag, Vijayawada, Chennai and bring cash and buy full cash houses in locations that rank at the highest earning zipcodes in the country. its a very normal thing, but you need the right vehicle and mechanism to do it.
            So suggest do that home work first before you look for the type of plot to invest
            Thanks SRaj. Yeah I do realize the trouble of brining back the money. On a related note, when people sell the inherited property in India(which might be a one-time thing and a big amount), is there a limit they can transfer overseas?

            Comment

            • #7

              #7

              Re : Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

              Originally posted by randomguy View Post
              Thanks SRaj. Yeah I do realize the trouble of brining back the money. On a related note, when people sell the inherited property in India(which might be a one-time thing and a big amount), is there a limit they can transfer overseas?
              You can transfer up to $1million provided you have done your tax return/CGT on the property and got clearance.

              There was talk about lifting the $1mil to $2mil, I am not sure if that got implemented.

              Comment

              • #8

                #8

                Re : Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

                Eco - I believe it is still 1M only , not lifted yet.
                But the big issue in that is - it has to be declared and accounted money in both countries
                Or you can hold the asset in india in your dad's name by sending the funds and repatriate it back as gift into US.
                But Dad has to sell and pay CGT on the sale and get clearance by the authorized dealer like HDFC through RBI.
                Im not sure what RG is trying to do , one end he is saying NRE FD and repatriate ?
                If the money is in USD inspite of SP500 at 2000 there are plenty of value opportunities that will beat all these returns and maintain the currency value.
                If dollar had withstood all the erosion until now why wont it be stronger going forward with Ms Yellen cutting the buy back by 10-15B every meeting.
                Corp profits are soaring, unemployment is falling , all the macro indices are strong, we are unable to find people to staff our open positions
                why would you want to take money out of US and put it india now ? dont know
                Even RE wise market in US as strong as it can be, real bullish
                I have learnt you cannot base your comment without hard backing in this forum
                So here you go --

                Real Estate Market Statistics for Mid-Atlantic Region | RBI

                Comment

                • #9

                  #9

                  Re : Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

                  Originally posted by SRaj001 View Post
                  Eco - I believe it is still 1M only , not lifted yet.
                  But the big issue in that is - it has to be declared and accounted money in both countries
                  Or you can hold the asset in india in your dad's name by sending the funds and repatriate it back as gift into US.
                  But Dad has to sell and pay CGT on the sale and get clearance by the authorized dealer like HDFC through RBI.

                  Im not sure what RG is trying to do , one end he is saying NRE FD and repatriate ?
                  No, I meant that it should at least do better than NRE FD (was using that as a baseline for comparison). I don't see the difference how holding the asset in my name or my dad's name would make any difference? Either way, I can only transfer the amount that is made as white transaction right? In case, the asset is in my name, I would pay capital gains taxes in US and if the asset is in my dad's name he would pay taxes in India. Other than that is there any difference?
                  If the money is in USD inspite of SP500 at 2000 there are plenty of value opportunities that will beat all these returns and maintain the currency value.
                  If dollar had withstood all the erosion until now why wont it be stronger going forward with Ms Yellen cutting the buy back by 10-15B every meeting.
                  Corp profits are soaring, unemployment is falling , all the macro indices are strong, we are unable to find people to staff our open positions
                  why would you want to take money out of US and put it india now ? dont know
                  Most of it is still in USD, just transferring to my NRE slowly in chunks depending on exchange rates.
                  I do have some investments in index funds and some stocks (though RE in India is the biggest one).
                  Do you think just index funds is better option than investing in RE in India (and then there is the exchange rate when I transfer)
                  Even RE wise market in US as strong as it can be, real bullish
                  I have learnt you cannot base your comment without hard backing in this forum
                  So here you go --
                  Real Estate Market Statistics for Mid-Atlantic Region | RBI
                  Thanks for the link. I can't afford 1M+ housing in the area I live(bay area) and haven't really thought about investing in other places. My eventual goal is to buy a house in 5 years once I decide where I want to settle down and I'm just pondering about investing options till then.

                  Finally, just thinking about this - why do NRIs even invest in India, if they don't plan to return back? Seems like selling the assets later and bringing back would be a mess.
                  Last edited June 26 2014, 03:39 AM.

                  Comment

                  • #10

                    #10

                    Re : Smaller Plots in City Vs Ground Plots in Extended Suburbs : Investment Options

                    true if you want to be in US keep India investments as much minimum as possible. Or if suddenly Indian RE is doing good then invest in India.

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