Tips on Buying Land

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DEMAND for land has increased over the past few years. Those who buy land are doing so for the yield and high appreciation rate.

Although land in more established areas around Klang Valley has enjoyed considerable price hikes throughout the years, the prices are still climbing due to demand that is outstripping supply. Here are some tips on buying land.

Where is it?

Within the Klang Valley, land for sale o the secondary market is still available. They are in parts of Klang, Rawang, Semenyih dan Kajang. However, scarcity means that the parcels tend to be small. Most of them are residential land, of between two and three acres on average. For industrial land, Bukit Beruntung is the area to look at.

There are more choices beyond the Klang Valley, especially agricultural land, in Negeri Sembilan and Perak.

Up-and-coming areas are located along newly built or upcoming highways. Land with a view of the South Klang Valley Expressway, West Coast Highway, KL-Selangor Expressway and the proposed Coastal Highway will increase in value.  

Land that is close to local amenities and the city centre will have  higher potential for appreciation. Aside from location, zoning determines the land’s current and future values. Zoning is determined by the respective locl councils, which may decide to convert land into some other use in accordance with their development plans. Watch out for these pieces of land. For example, land in Kampung Baru Subang and Kampung Baru used to designated as agricultural land but have since been rezoned into commercial and residential areas. Their values have shot up.

As properties, freehold land is preferred over leasehold ones, although the latter is less of a factor where popular locations are concerned. However, be wary if the lease is about to expire, as costs will be incurred to renew the lease.

How much to pay?

Besides its location, land is also valued according to its size. Small parcels of land tend to fetch better values than larger ones. At times, a smaller piece could cost more per square foot. This is because smaller pieces tend to more affordable and people don’t mind paying higher prices instead of forking out a large sum for a big piece of land.

The condition and shape of the land also affect its value. What is the terrain and topography like? It is flat, sloping or undulating? Do not buy marshland, lowland and hill slopes, as they are difficult to build on. If you are buying land for agricultural purposes, get an expert to check the soil type and quality. If you are buying residential land, evaluate it from a landscaping point of view. The view is important for those buying residential land; some maybe more inclined to buy a hill slope if it has a great view.

What to anticipate?

Financing land purchases may be more difficult owing to the low margins and higher interest rates. Loan margins given only range from 50% to 70%. Interest rates are higher. For residential land, it ranges from BLR -1% to BLR +1.5%. Compare that with BLR- 2.4% for properties. Still, few banks offer loans for agricultural land. Some banks impose stricter requirements. Some banks only disburse loans if the land comes together with a house plan.

Avoid getting a loan if you have cash. Land loans can be very costly Saving money and then buying your land is a better option.

There are also risks attached to buying land. Anything can happen, including rezoning and building that encroaches into your parcel. The local council can always rezone it into something else, or even plan to build a highway across your property. If the latter happens, you will likely receive compensation but it may not be at the market rate.

What You Should Ask Before Buying

What can I build?

If you want to build on a piece of property, find out how high you can go. Certain types of land come with a limit on the number of storeys. For example, the Taman U-Thant area in Kuala Lumpur can only have buildings of less than 10 storeys, whereas neighbouring KLCC can have buildings of 50 storeys or more.

Where can I not build?

A setback is described as the distance between a building and a road, neighbouring land, river or shore. Usually determined by the local government, the setback shows how much development, such as the widening of roads, can encroach into your land. So, do look out for setbacks and how much of it may be acquired.

Will I own the land?

Ensure that the land title is free from encumberances and there are no legal problems associated with it. Thereafter, get the legal papers checked for authenticity. Many investors have been careless and duped into parting with their life savings. Seek legal and professional help.

(Source: Personal Money)