Buying land for investment or for living is considered to be a major move emotionally and financially. At times, buying a plot can be challenging unless you have a sound financial backing for the investment. It is observed that the value of plots generally rises faster than that of apartments. Even the age does not affect a land price, but a structure becomes dilapidated with time. Besides, in an apartment, you have limited layout options. Many individuals prefer investing in a NA plot then on a flat since it’s an economically better option in a long run than buying a constructed property.
This is because the land appreciates more that any constructed property and you can expect a better value for money. However, purchasing a plot involves more precautionary steps than purchasing apartments and pre-build houses.
Plots are broadly classified into three major types:
- Agricultural Land (Green Zone)
- Non-Agricultural Land or NA Plot (Urbanizable Zone, Industrial Zone, Recreational Zone & Residential Zone or R-Zone.)
- Forest Land (Forest Zone)
Definitions and Meanings of commonly used terms and the significant differences between an NA Plot and Agricultural Plot.
Agricultural Land/Plot – Agricultural lands are typically lands devoted for agricultural activities. It is, thus synonymous with farmland and cropland. It is strictly forbidden to construct a residential or commercial estate upon agriculture lands. Non-farmers are not eligible to buy agricultural land in India. The area is primarily engaged in agricultural activity are also categorized as Green Zone (G-Zone). According to the Government of Maharashtra, buying an agricultural plot less than 11,000 sq.ft. will not be considered legal and therefore no Sale-deed or 7/12 extract will be issued.
Non-Agricultural Plot/Land – Before carrying out any development on the agricultural land, the person has to apply to the collector for the permission to convert the use of agricultural land for any non-agricultural purpose. After converting the agricultural Land into NA plots, it becomes easier to receive permission for construction from the local governing bodies.
7/12 Extract – A 7/12 extract (Saat-Bara Utara) is one of the most important legal documents to identify the sole owner of a particular land in Maharashtra. A 7/12 extract is an extract from the land register maintained by the revenue department of the Government of Maharashtra, India. It basically gives you the information such as; Survey No. of the land, Name of the Owner of the land, the area of the land, the type of land, type of cultivation – irrigated/rain fed & the names of the crops planted in the last cultivation season.
FSI (Floor Space Index) – FSI is nothing but a ratio received from the government for the development on a particular land. However, the permitted FSI for every land is different according to the type of the land. The approved FSI for an Agricultural plot in Maharashtra is very less, i.e. approximately 0.04, this may vary as per the land zone.
Construction Right – After attaining all the legal ownership of the land, the next step includes receiving permission for construction on your plot/land, from the local authorities. However, seeking permission for construction on a NA plot is easier in comparison to that on an agricultural plot.
Loan – No bank loans are available to buy an agricultural plot. You can easily apply Loan for a clear title N.A. sanctioned Plot/Land. There are many nationalist, semi-national and co-operative Banks that lend loans to buy NA Sanctioned plots/lands.
Future Reservation – This is one of the important factors that you must consider to cross check before buying any plot. Check with the Town Planning & Development Authority, to confirm if there are no future reservations of development such as, school, college, road, garden, etc. on your land in order to avoid future difficulties. However, such reservations are often appeared on an agricultural land.
Taxation: In India Agricultural land is not considered as a capital asset. On the other hand, the person has to pay taxes for NA Plot /Land, from the date on which the NA Sanction begins.
Penalty: If any Agricultural land is used unauthorized for non-agricultural purpose by the occupant without obtaining the right permission, then, it shall be lawful for the Collector to stop its unauthorized use and ask him to pay the NA taxes and the penalty for making unauthorized use of an Agricultural land.
Open Space: As per government norms, for a NA plot it is mandatory to allot approximately 35%-40% open space. However, this isn’t the scenario in case of maximum agricultural plot projects.
Area Deduction: There is no area deduction for an NA plot, for instance, if you are planning to buy a 1,000 sq.ft. plot you are allotted the same area as mentioned. On the other hand, for an agricultural plot there are chances of area deduction for road development.
Society Formation: There are absolutely no problems in society formation for a sanctioned NA Plot project due to which the project remains well maintained by all society member. This isn’t the same in case of an agricultural plot, 99% agricultural plot cannot form society, this leads to poor maintenance or no maintenance.
Revised layout – It is easy to revise your layout plan legally in a sanctioned NA plot. Layout plan of an agricultural plot is a private layout, therefore, they can revise it as per their choices & preferences.
Resale – The value of a NA plot is higher than an agricultural plot because of the demand-supply difference. The Number of clear title NA land is comparatively less, therefore, their resale value is high. The resale value for an agricultural land is comparatively very low.
Surety of investment – There are numerous shortcomings or violations of government act that one may face while investing in an agricultural plot, which is less than 11,000 sq.ft. Investing in a clear title Residential NA plot is always considered as a tension free investment solution.
Potential investors – Agriculture plots are only meant for the purpose of agriculture; a non-farmer/NRI are not eligible to buy agriculture land. Any potential buyer, investor or NRI is eligible to purchase a NA plot /land in India.
|Agricultural Plot/Land||Clear Title N.A. Plot/Land|
|Plot/Land||An agricultural plot is used exclusively for agriculture. It is ill-legal to construct residential or commercial estate upon on such land.||An NA plot is obviously Non Agricultural land. You can develop on the said land provided it is the right zone and you obtain all necessary permissions from the local authority.|
|Sanction||Private Layout||Collector Sanctioned N.A. Plot - It is the last and the most important sanction, granted by the collector or sanctioning authority.|
|FSI||Approved FSI for an Agriculture Plot/Land can be up to 0.04.||Approved FSI for an N.A. Plot/Land is up to 0.75 to 1.|
|7/12 Extract||7/12 Extract minimum area 11,000 sq.ft.||7/12 Extract minimum area as per sanctioned layout.|
|Note : New 7/12 extract shall , then , reflect the name of the new-owner, i.e. the buyer.|
|Construction Rights||No - Need for N.A. Approved construction plan.||PMRDA|
|Loan||No Loan from nationalist, semi-national and co-operative Banks.||Yes. Loans Available|
|Future Reservations or Acquisitions||Yes, there are chances of future reservation development on plot or land||99% no chances of any future reservation development.|
|Taxation||Agricultural land is not considered as a capital asset .||The person has to pay N.A. taxes from the date on which NA use begins.|
|Penalty||Unauthorized use of non-agricultural without obtaining permission, will lead to heavy penalties.||Since all the legal procedures are completed, there are no chances of penalty.|
|Open Space||No.||Yes. Approx 35%-40% open space.|
|Resale||Probably Less||100% Resale rate|
|Surety of investment||Violation of government act.||Tension free investment|
|Who can purchase||Meant only for the purpose agriculture, a non-farmer is not eligible to buy A-land without prior permission of the collector.||Any buyer or investor (INRs can also purchase)|
Before buying any property, it is essential to first focus on one’s own requirements. No doubt a NA plot has the advantage of assuring big returns on investment, but it usually needs investment in full term and there is no choice of taking leverage on the fund. On the other hand, buying a flat is very easy so that an investor can take leverage on its fund.
Before conforming to buy a NA Plot, it is advisable to get all the documents to be checked by a lawyer to ensure they are original and have no flaws, in order to protect yourself from fake registration and from properties that is stuck in court litigation. Apart from the documentation it is also important to check for the connectivity of the plot and ensure that the property is not isolated, its proximity to basic necessities such as, schools, colleges, market, hospitals, transportation, entertainment, etc.
Buying a plot and constructing your own house is more satisfying since, the owner of the house is involved in every step of the construction process and everything is done as per your choices and preferences.