Land or flat? Title risk, RERA's gaps on plots, and a ₹40 lakh 10-year comparison

Rules and rates as of 12 October 2026.

A plot looks simpler than a flat: no lift, no society, no builder delays on a tower. That simplicity is misleading. With a flat, most of the risk sits in construction and possession. With a plot, the risk is mostly in the paperwork. Is the land really the seller's, is it approved for housing, and will a buyer want it from you later? This explainer covers where RERA protects a plot buyer and where it does not, how tax treats each on sale, and a 10-year comparison worked out in rupees.

Why plot schemes need more checking

A flat in a large project leaves a long paper trail: building plan approval, a RERA registration, a commencement certificate and, at the end, an occupancy or completion certificate. A plot can change hands with much less. Raw land can be divided on paper, marked with stones, and advertised with a brochure before any layout approval or land-use conversion. That gap is why plotted schemes on city edges need more checking than a registered apartment project. Common problems include one survey number sold to two buyers, agricultural land sold as "residential" without conversion, unapproved layouts, and family members who never signed away their share.

What RERA covers for plots, and its gaps

The Real Estate (Regulation and Development) Act, 2016 does cover plots. Section 2(zn) defines a "real estate project" to include "the development of land into plots". Section 3(1) bars a promoter from advertising, marketing, booking or selling "any plot, apartment or building" in a project inside a planning area without first registering it with the state authority.

There are three gaps to know:

• Small projects. Section 3(2)(a) exempts projects where the land to be developed is not more than 500 square metres, or the apartments proposed are not more than eight across all phases. The Act counts apartments here, not plots. A state government can lower these thresholds, so check your state's rules.
• Outside planning areas. The duty to register applies to projects "in any planning area". For projects outside one that have local-authority permission, the Act lets the authority order registration, but registration is not automatic.
• Resale and individual sellers. RERA regulates promoters. A plot bought from a person who already owns it, with no developer involved, is outside the project-registration regime, and the checks are all on you.

Where a plotted layout is registered, the state RERA portal shows the promoter, approved layout, land documents and timelines. If a scheme should be registered and the portal has nothing, that is a warning sign.

What to check on a plot's title

Each state keeps land records under its own name. Karnataka's Bhoomi has the RTC (pahani). Maharashtra's Mahabhumi portal gives the 7/12 extract, the 8A extract and the property card. The Mahabhumi site itself says its online view is not for official or legal use, so get certified copies. Bring these to a property lawyer:

• Record of rights in the seller's name, and mutation entries that match the sale deeds.
• A 30-year chain of registered sale deeds and an encumbrance certificate from the sub-registrar for the same period.
• Land-use conversion order, if the land was agricultural, and an approved layout plan from the planning authority.
• Survey sketch and boundary measurement that match the plot on the ground.
• Consent of all legal heirs or co-owners, and no pending court case on the survey number.

For a flat in a RERA-registered project, the land title has usually already been through the promoter's registration filing and a lender's legal check. You still verify it, but you are rarely the first to look.

Loans, liquidity and rent

Lenders treat land differently. Many banks fund a plot only as part of a plot-plus-construction loan, with the house built within a set period. Ask your lender for its written policy before you count on a loan. Without one, you may need far more cash up front than for a flat.

A plot also earns no rent, and it can be slow to sell. A flat in a working neighbourhood has a deep pool of buyers and renters. A plot's buyers are mostly people planning to build or wait, and many of them will run the same title checks you did. Any gap in the papers will show up when you try to sell.

Tax on sale: the house-reinvestment trap

After more than two years, both are long-term capital assets. Under section 197 of the Income-tax Act, 2025, long-term gains are taxed at 12.5%. Land or buildings bought by a resident individual or HUF before 23 July 2024 get a cap: tax is limited to what it would be at 20% with indexation.

The exemptions differ:

• Selling a flat falls under section 82 (formerly 54). The gain is exempt to the extent you reinvest it in one residential house in India: bought within one year before or two years after the sale, or built within three years.
• Selling a plot falls under section 86 (formerly 54F), because a plot is not a residential house. The whole net sale price has to go into a residential house for full exemption, with proportionate relief otherwise. The section does not apply if you own more than one other house on the date of sale.
• Buying a plot with the proceeds does not by itself qualify under either section. Both require a residential house as the new asset. A plot counts only if a house is built on it within three years.

Worked example: ₹40 lakh plot vs ₹40 lakh flat over 10 years

All rates below are illustrative assumptions, not forecasts. Plot price grows 8% a year, flat price 5%. The flat earns rent at a 2.5% yield (₹1 lakh a year), occupied 11 months, so ₹91,667 in year 1. The flat's costs are ₹36,000 maintenance plus ₹10,000 property tax. The plot's costs are ₹15,000 upkeep and fencing plus ₹5,000 tax. Rent and costs rise 5% a year. Sale expenses are 1%. Stamp duty is left out because it is the same for both. Neither owner claims a section 82 or 86 exemption.

Formulas: sale price = ₹40,00,000 × (1 + g)¹⁰. Gain = sale − 1% expenses − ₹40,00,000. Tax = 12.5% × gain. Total rent or cost over 10 years = year-1 amount × (1.05¹⁰ − 1) / 0.05.

Item (10 years)	Plot (8% a year)	Flat (5% a year)
Sale price	₹86,35,700	₹65,15,579
Sale expenses (1%)	₹86,357	₹65,156
Capital gain	₹45,49,343	₹24,50,423
LTCG tax at 12.5%	₹5,68,668	₹3,06,303
Rent received (before income tax)	₹0	₹11,52,973
Holding costs	₹2,51,558	₹5,78,583
Net gain over ₹40 lakh	₹37,29,117	₹27,18,510
Annualised return	6.81%	5.32%

The plot comes out ahead only because we assumed it grows 3 percentage points a year faster. At 5% for both, the plot's net gain falls to ₹18,92,562 and the flat leads by about ₹8.3 lakh. The break-even in this model is roughly 6.4% a year for the plot. Below that, the flat's rent wins. The table also leaves out three things that weigh against the plot. Its slower sale means the money is locked in longer. A title defect can push its value towards zero. And it needs a larger cash down payment. Against the flat, rent is taxable income, which this table does not deduct.

Change the assumptions to match your city and your own numbers. The structure of the comparison stays the same: for a plot, the return depends on appreciation and a clean title.