People in India have always had a deep-rooted connection with land, which has held immense cultural, social and economic significance in their lives. It is no wonder that the concept of plotted developments has gained traction as a preferred investment avenue. In this blog, we explore the concept of plotted projects and what makes them an extremely attractive real estate asset class for debt investments.
What are plotted development projects?
Unlike traditional real estate projects, plotted development involves dividing large parcels of land, after master planning and providing common infrastructure, into small residential plots. Common infrastructure includes roads and pathways, clubhouse, power lines, street lighting, water supply, sewage systems etc.
Homebuyers want to buy these plots as they offer the opportunity to build independent homes or hold them as long-term investments, requiring minimal maintenance.
The popularity of plotted development can be witnessed in various cities across India. Some active belts known for their thriving plotted development projects include Bangalore, Chennai and Hyderabad in the south and Gurugram and Noida in the north.
Why do Institutions prefer debt investments against plotted projects?
While preferences may vary based on investment strategies and goals, institutions such as financial institutions and large private equity funds often view plotted developments as an attractive asset class for debt investments due to the following factors:
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Lower Development Cost and Short Construction Timelines:
One of the key advantages of plotted development is the significantly lower development cost required, which amounts to only 1/6th of the total development cost of an apartment project. This translates to ~83% less capital requirement.
This also significantly reduces construction timelines for plotted developments typically spanning 9 to 12 months compared to other apartment projects that can take 36 to 48 months to complete.
These factors reduce the financial risk associated with investing in real estate, making it more accessible to a wider range of investors.
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Accelerated Collection Cycles:
Unlike apartment projects, where collections are realized over a span of 36 to 48 months, plotted developments offer quicker returns on investment, typically within 9 to 12 months due to short construction timelines.
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Faster Approvals:
Approvals for the Plotted developments are much simpler and also number of approvals are lesser when compared to larger-scale apartment projects.
Due to these factors, plotted developments offer enhanced visibility and predictability of cash flows which is a prerequisite for any debt investment. This makes it an appealing choice for institutions seeking debt investments in the real estate sector. Recently, TVS Emerald has recently in 2023 set up a platform for plotted development for 1,000 crores with HDFC Capital.
Explore NCD Investment
By exploring NCDs backed by plotted developments, investors can unlock institutional grade investments with high returns and low risk, adding a valuable investment to their portfolio.
The Restack, a fractional investment platform, offers NCDs backed by plotted developments in attractive micro markets with potential returns of up to 16% IRR providing a powerful tool for diversification, stability and enhanced returns.
Ready to embark on your investment journey? Connect with The Restack to learn more about the potential of plotted development and explore investment opportunities tailored to your financial goals.
Disclaimer
NCDs are subject to risks. Please make your own independent assessment of the merits and the risks of the investment opportunities available on the platform or mentioned in this blog, and conduct your own diligence and consult your own advisors on the legal, business and tax matters. The Restack does not give any investment advice or recommendation in respect of the opportunities available on the platform or mentioned in this blog and accordingly, nothing on the platform or in this blog should be considered as an investment advice or recommendation. Please refer the terms and conditions for further details.
