Buying a dream

Buying a dream

Many clients come to us for advice regarding buying a plot for building their own house. While investing some factors might be overlooked whereas, when buying a plot for building a house all factors come into play. The investment sentiment is far lesser when considering to build your own house. The factors which need to be considered will be explained along with areas of interest. There are two types of people one who want to build immediately and others who want to build at a later stage.

Factors which should influence your decision

a. Accessibility

This is one of the major factors which should influence your decision whilst buying a plot for building a house. This is one of the major factor which comes into play. You should see how far the market from your house is, so that it is easy to buy everyday necessities. Another factor is the approach to your house. One should consider how far the main road from your chosen plot is. There should be a minimum number of turns from the main road when reaching the chosen plot.

b. Trend in the area

The number of houses being built in the particular area. Human beings are social animals therefore, it is necessary to consider the total number of houses built including those being built in that area of interest. This means as the populous increases and the block becomes saturated the price of the plot has a fair chance of going up compared to other blocks in the same vicinity.

c. Future prospects

The future prospects of the Phase, Block should also be evaluated. An example could be Phase 5 which is saturated and provides a good living but Phase 6 although less populated has a far better infrastructure compared to Phase 5. Comparing blocks can be e.g. a park yet to be build versus a park which is operational. A park yet to build in a certain block might have lesser prices but it’ll be built within a year or two.

d. Investment orientation

I deem it to be of least importance for people who want to build a house immediately but it might be of more importance for a person looking to build a house after 5 years. An example could be a person buying a plot in Phase 9 who wants to build in 5 years’ time is ideal from an investment standpoint. Less saturated areas will give comparatively more returns an example is Phase 5 which is almost saturated versus Phase 6 which is only 35% occupied. Same connotation could go for plot prices in various blocks.

e. Budget

People mostly have confined budgets in which they want to stay for a plot. When choosing a plot a better block should be of foremost importance. An example of this would be buying a plot in X block of Phase 7 of 125 lacs which is standard versus buying a plot facing overhead tank (OHT) in S block of Phase 7. In my opinion as you have to build a house once and stay in it for a longer term I’d recommend S block as it is more premium. Always have 10 lacs extra while choosing a plot for constructing a house. With a rigid budget you might miss out on an opportunity which you will regret later. The budget for constructing a house should always be separate than the plot. Don’t mix them together it would subconsciously restrict your options when choosing a plot.

f. Time frame

Always have a time frame in your mind when to start construction. If you want to start after two years buy a plot which might give you more return on investment as well. After two years the price might be mature or nearing maturity. After all your money needs to grow as well. People are sometimes of the view I won’t sell what use is it to me if the plot price increases. The reason for factoring time to construct is that dynamics of that particular plot or block might be different in two years’ time. You might want to switch and start immediately. You can have money constraint for construction at that point in time therefore, you can look for a less saturated area with a few houses and pocket some capital to spend on construction. There could be various factors. Change of plan for instance etc.

Contributed by:

Umer Shehzad

 MBA Finance (Cardiff University, UK)

Managing Director at Imlaak

For counselling contact (+92) 03208484630