Cart is empty Whenever investing in real estate, you are bound to come across these two terms i.e. plot and file. It is imperative to understand the difference between the two so you can make the right decision. In this post, we will try to cover the differences between the two and whether you should invest in one or the other.
Plot Files
When a housing society is in the early stages of development, the society can decide to sell plot files. The files mention the area of the plot and other details. Buying a file means, you cannot immediately start construction because you will not yet own your plot. It is because there isn’t a plot number against the files yet. After balloting, a plot number will be allotted in the future.
Selling files helps the housing society generate funds for development like roads, sewerage systems, greenery etc. For the people who are investing, it means they can invest by spending less money as plot files are cheaper than actual plots.
Plots
Well, we all know what a plot is. It is a piece of land, otherwise known as ‘immovable property’ in terms of law. It is a marked piece of land with fixed dimensions, for example, a 5-marla plot or a 1-kanal plot. The plot can be commercial or residential.
On-Ground Plots
When a housing society has a map of the land with plot numbers, it means that the plots are now on-ground. Files can be sold of on-ground plots too with the promise of balloting later on.
Balloting
Balloting means, a draw will be conducted of the plot numbers against the file owners and each of them will be given a plot number. This means their file will now point to a piece of land demarcated on the ground and they can make full payment and become its owner.
File vs Plot
In the following points, we will take a look at the pros and cons of both file and plot with respect to different factors.
Tangibility
A plot is tangible and secure whereas a file is intangible because it doesn’t have the plot against it.
Liquidity
A file is easy to liquidate as compared to the plot. But… if the real estate project doesn’t deliver on its developmental milestones then the value of the file will decrease and no one will buy it.
Volatility
File is more volatile whereas the plot is a relatively stable commodity with a steady increase in price over the years.
Price Point
A file is cheaper whereas a plot is expensive.
Speculation
Speculation plays a huge role in the case of a file but not as much in the case of a plot. Files are usually sold when the project is new and development hasn’t started. So, there is a lot of speculation on what kind of project it will be, with lofty promises from developers.
Supply
The supply of plots is limited because the land is limited. Files wherever can be printed in excess which is done in case of fraud.
Demand
The demands for files usually come from investors who want to sell them ahead. Whereas a layperson who has savings and wants to make a house or wants to save for the future, usually prefers a plot.
Price Point
Plots are expensive whereas files are cheaper.
Tax
There is no tax to be paid on file but for a plot, you have to pay the relevant taxes.
Utility
The utility of a plot is that you can do construction or sell it in the future which will result in you having additional money to the amount you used to buy the plot. The file’s utility is only for profit.
Market Perception
For a plot in a well-developed area, it is considered worth investing in. File, on the other hand, is usually bought so it can be sold as quickly as possible when rates are high.
Dependency
When you buy and ultimately own a plot, you are not dependent on anyone. But when you buy a file, you are highly dependent on the developer in the sense that their developmental work will affect the value of your file drastically.
What does it mean to buy a file?
It means you are buying a piece of paper which will have a piece of land against it in the future after balloting. After society has some developmental work done the price of plot files will go up and investors can earn profit by selling the files to someone willing. The profit on files, when the demand is increased, is called ‘aun’.
Buying files is cheaper but riskier as compared to buying an actual on-ground plot. Because the worth of a plot file is bound to fluctuate with the market forces. If you have money to invest and can handle the risk that a file poses, you can invest in a file. Do your research about the real estate project and its developers before investing.
What does it mean to buy a plot?
It means you are buying an actual piece of land, of which you will be in possession, after full payment. If you wish, you can start construction on it as well. Plots can also be sold for profit. Plots are expensive as compared to files but the investment is less risky because the plot is a piece of land that the investor owns. Even if the price of the plot fluctuates a bit, over an extended period, it will eventually keep on increasing. And you will still own a piece of land which you can use for construction.
How do file frauds happen?
If a society has space for 1000 plots then it should sell 1000 files, meaning after balloting each file will get a plot number. But fraudulent organizations sell more files than the actual number of plots they have. It means that after balloting, the remaining number of people are left with only a plot file with no land against it hence their investment is now worth nothing. Due to frauds like this people have less trust in files.
How to stay safe?
Whether you are buying a plot or a file, you should stay vigilant and invest where your money is safe. Always make sure that the society is approved by relevant authorities for example: in Lahore, the housing societies are approved by LDA (Lahore Development Authority). For Punjab, you can check the list of approved societies here and for Lahore, you can check the approved societies on LDA’s website.