The Indian real estate market offers a plethora of options when it comes to investing in land. Among all, land banking is currently gaining momentum at a fast pace. It is a practice under which investors aggregates land parcels and plots at the current market price or lower price which they use to sell in the future. The land can be invested in different geographies or localities or demography.
How Land Banking works?
Under the land banking procedure, an investor buys raw plots which then changed in the prescribed formats of selling. The investor prepares title reports, the boundary of the property, zone regulations, conversions, land registrations, basic approvals and sanctions for the land. Once the procedure is completed, the land can put for selling by the land bank aggregator to gain profits on investment.
Land Banking- Organizations Involved
Individual Investor: Many property investors love to invest in a variety of land parcels and plots just for security or wealth creation. This helps them to enjoy a peaceful retirement period as well as aggregate ample funds for an emergency.
Central and State Government: Most of the government agencies aggregates land parcels for civic planning and infrastructural development in the future. It may be used for the development of roads, metro stations, hospitals, government schools, parks or other residential development.
Universities and NGOs: They also collect land for future development or any other public related works.
Land Banking- Types of Model
Buy-Sell Model: Under this, an investor buys the land parcel from the primary party and then sells it to another party.
Land lease Model: Here the landowner leases the property to another firm on a long lease without any development. The land aggregator works as a middleman between the primary seller and the buyer and helps in processing lease contracts as well as mobilization of land.
Joint Development Model: This model is quite popular among most of the land banking aggregators. Here, both the landowner as well as developer works in coordination with each other for any kind of development involved in the land.
Land Banking- Key Factors for Investment
Any investment can only be fruitful when it is surrounded by a multitude of amenities as well as well-developed social and civic infrastructure. Same is the case with investment in land banking too. The important factor for invest here includes clear title, smooth connectivity, well-developed infrastructure like the presence of schools, college, hospitals, public transportation in the vicinity. Access to 24*7 water and electricity supply, industries, residential and commercial spaces are another driving factor for investment.
Land banking- Phases of Investment
In India, investment in land banking can be done in various phases:
Under-developed Phase: Under this phase, a land aggregator invests in a plot which may be farmland or agricultural land or any other non-converted land.
Pre-developed Phase: Under this phase, a land aggregator invests in a plot which may be half-developed and is also surrounded by a developing social infrastructure so that the value of the land increases with the pace of development.
Developed Phase: Here the land, aggregator first developed any residential or commercial space on the plot which instantaneously increases the value of the property.
Land Banking- Benefits for Buyers
Any investment which provides high ROI at the end of the day is considered as profitable. Same is the case with land banking. A plot which is surrounded by a plethora of facilities mostly witnesses a higher value appreciation. Also, if the investment is made a lower cost, then a considerable profit can be made in the future. Apart from this, if you have all the approvals and proper registration in hand, then you can easily attract potential developers towards it.
Land Banking- Benefits for Sellers
A land banker buys land or plat at a higher price than the current rate form the seller. This is a benefit for the seller. Also, while selling it to land banker eliminates any kind of unsuitability risks attached to it.
Land Banking-Current Status in India
In recent years, many villagers and small landholders have sold their land to various big players as well as state government and local administration for infrastructure as well as industrial development. Also, with the implementation of RERA and GST, the procedure of land banking has become transparent and buyer-seller friendly.