Apartments vs Plots: Which one is the better investment?

Real estate in Pakistan is a very diverse industry with different types of investment opportunities developing every day.  Moreover, there are different kinds of investment opportunities in real estate such as apartments, houses, rental, commercial, plots and flats. However, in Pakistan plots and flats are the two most lucrative investment opportunities due to various reasons. If you have a confusion on which one is a better business opportunity, then this article will clear that confusion for you.

Benefits of investment in Flats:

In Pakistan flats are the most secure form of investment for people who are looking for monthly rental income with steady flow of cash. There are some pros of investing in flats which are as follow.

  • Reliable Source of Income

Flats or apartments are the safest options when it comes to secure and reliable flow of income. In addition, Flats provide better return on investment (ROI) compared to other investment opportunities like stock market and unlike stocks there is no fear of market crashing. Moreover, the value of flat keeps increasing in addition to monthly rental income.

  • Asset Valuation

Flats can provide exceptional value increase that is unparallel to any other investment in Pakistan. Furthermore, the rental value of the property increases each year, and based on the location of flat the value of property can increase multiple folds. Moreover, the flats need to be kept well maintained in order to reap the benefits of value appreciation.

  • Diverse Portfolio in Short Time

Investment in flats or apartments is for people who wants to diversify their investment portfolio with extensive rental units. Moreover, managing a set of flats is much easier compared to managing stocks with different kinds of stocks and all the risk associated with that.

  • High Demand

In Pakistan, there is very high demand of flats or apartments that can be predicted for incoming future. Additionally, Millennials who prefer a simplistic lifestyle and avoid buying properties are prospective tenants in future. Moreover, many families are also preferring to move to city centers instead of living away from city due to high fuel prices. Keeping in view all these factors the demand for flats is expected to increase and investing in flats is predicted to perform batter then other opportunities.

  • Protection From Inflation

Generally, real estate has shown highest correlation to inflation in contrast to any other asset class. With high inflation government resorts to printing more money which results in devaluation of currency. Additionally, It is important to understand the advantages of regular monthly income with increase in value of asset.

Cons of Investment in Flats:

Just like numerous benefits there are some cons to investing in flats which are:

  • High Investment Cost

There is high initial Investment required to buy a apartments in Pakistan. Moreover, due to high interest rate it is not viable to lease flats from banks. In stocks and plots there is usually low initial investment required compared to flats. Furthermore, it can take up to 15 to 20 years to recover the investment from rental income.

  • Lower Liquidity

Compared to plots and stocks flats are considered less liquid investment. Incase you need your money back overnight; flats are not the best option for you. Due to less customization, they take time to sell. Furthermore, very few people buy apartments for personal use and majority use them as an investment opportunity.

  • High Maintenance Cost

Flats also requires high maintenance as compared to plot. Moreover, there is an annual renovation cost plus there is also need of repair usual wear and tear. Furthermore, rental residents tend not to take care of property that can result in destruction of property.

Pros of Investment in Plots:

There are numerous reasons to invest in plots compared to flats in Pakistan and some are mentioned below:

  • Safe Investment

With the rise in urbanization, Pakistan witnessed the rise of real estate industry. The demand of residential plots is increasing day and night. Furthermore, people are investing in plots for personal use as well as putting investment in safe heaven which are plots in Pakistan. Compared to flat, investing in plot is safer since buildings are prone to collapsing. Moreover, plot if purchased on right moment guarantees a higher return on investment.

  • Multiple Uses

Plots are mostly used to build residential houses but there are other multiple uses of plots. Additionally, they can be used as a farmhouses where you can grow vegetables and raise cattle. They are also good for small parties and evening walks. Moreover, plots can also be used for commercial purposes such as small factory and parking places.

  • Goodwill

Many people are trying to move away from city hassle towards more ecofriendly places and less pollution and lower population density. In Pakistan there are many housing societies that are built on outskirts of cities. Therefore, they can be ideal for people who wants a peaceful environment. There is no rental income from plots, but they are still an ideal investment since they return is relatively high compared to flats.

  • Low Maintenance Requirement

Unlike flats there is very minimal to low maintenance cost associated with plots. Moreover, there is usually a boundary wall and a gate required to secure a plot and that’s it. There is no annual maintenance required of plot. Moreover, you need to invest again on a plot only when you decide to build a structure on that plot.

  • Higher Liquidity

Compared to flats, plots have a higher liquidity and if you decide to sell a plot you can get your investment out of it relatively quickly due to high demand. Moreover, Investors and property dealers are ready to purchase plots at a very short notice and this is not the same when it comes to flats.

Cons of Investing in Plots:

There are some disadvantages of purchasing plots which are:

  • Transfer Takes Longer

The transfer of plots usually takes longer compared to flats. First there are many official hurdles and higher taxes. Moreover, once a plot is purchased you must build the structure on that plot. This requires time unlike flat in which you can move in at a short time.

  • Costly Construction

With the higher inflation and increase in cost of materials the cost of constructing a house has quadruple in few years. Moreover, the cost of building in housing societies is relatively high since they required an engineer and architect to design the house.

  • Soil Assessment

There is mandatory soil assessment required before construction on a plot which requires time and money. Moreover, if the soil is considered as unstable there is a lot of hassle to enforce the structure.

  • Lack of Financing Options

Usually when there is flat project underway there are numerous easy financing options available. Anybody can pay the down payment initially and rest of the amount in easy installments. On the Contrary, there are very few financing options available when it comes to plots. In most cases you must pay upfront to secure your plot.

Conclusion:

Just like any investment opportunity there are different advantages and disadvantages of investing in flats and plots. There is no one case fits all so everyone must invest according to their need and requirement.  Finally, you can choose the best option according to your budget.



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