RETURNS ON LAND




A legendary example to quote the returns on a raw land can be made viable by the activities of Wal Mart. He used to fly over the city frequently having a bird's view of the city every now then. When ever he found new plots and development over any area, he made attempts to establish his business store in that area. This brought him good business by opening up stores on the raw land. The lesson that he wanted people to learn is that when people are intended in making money by buying and selling land, it should be done where human settlement is heavy.

The term is rightly called as the "Land Banking". People buy land and hold it believing the value will be appreciated. Raw land where cultivation is not possible can be used for some other activities. Investment in land will always bring in good hopes of return and hence people buy plots. Small investors are dependent on this business on a massive scale. But one disadvantage is that people tend to hike the prices heavily creating artificial demand and this may lead to a dismal show.




The second way to gain returns on raw land is by selling the remnant piece of land for different projects like industrial development or housing projects. The piece of land will not be hold for a larger period of time by the owners. They make a sale and quickly move on to the next project. The investment is huge when the deal is made on a commercially viable area. Often people hold a portion of a larger building constituting a smaller proportion. A tax payer might be willing to sell this and it can have a good value if it is located in a commercially well doing business area.

One can make tangible or intangible improvements to the site which can increase the commercial value of the plot. Tangible movements are the one that are made by making hard changes to the property such as making a construction. The value can be increased by constructing a commercial building or a chain of stores which can be rented. Depending on the location, they can attract the investors. Office buildings can be set up but they demand a heavy investment in construction. Lots of green design and rules have to be followed up while setting up an office building. This may be rented or leased for certain number of years. But one must be wise to decide upon the construction. One must not develop any industrial building in a residential area. Bank loans can be taken to develop the property. But it can be given for persons with a good track record. The loans will be sanctioned depending upon the property value. The land is made collateral to the loans offered. Soft improvements are zoning changes, planning approvals and financing-even architectural drawings.

It is proven that commercial real estate is better when compared to the residential real estate in terms of profits and business volume.