Monday, July 02, 2007

Land Investment in the UK. Is it for real?

Have you ever been approached by someone to buy a piece of land in the UK? Well, ..... I have.

This is my story.....the cheapest plot was about RM60,000.00 BUT the return on investment in 5 to 7 years would be a whopping 400% (as explained by the Sales Executive). Sounds like a HYIP right?

This is how it works; the company will buy a large piece of undeveloped land that it believes has good potential for development and divide it into many smaller plots. It will then sell these smaller plots to individuals. In the meantime the company will submit its planning to the local authority to convert the land into residential / other commercial land. It will then assist to sell the plots to a developer at a very high price.

I wonder if one can get a 400% return on investment (which is so very good) why the government do not let its own people to enjoy that profit? Why sell it to outsiders? Is the return on land investment for real? Honestly I felt tempted to own a plot with the hope of making 400% return in 5 - 7 years time but again I was scared to end up as loser. What if the land price declines or the price incremental is lower than expected?

This is the excerpt of the statement issued by the Financial Services Authority of the UK in relation to the Land Banking issue.
3 January 2007
The FSA is aware of several companies operating and marketing what are known as 'Landbanking' schemes in the UK.
Companies operating these schemes are seeking investors to buy plots of land in areas which have not yet been granted planning permission, and may be in 'Greenfield' or 'Greenbelt' zones. The operators of these schemes offer to handle the planning permission application process for the plot-owners. They claim that once owners are granted planning permission they can sell the whole site to a developer for a substantial profit.

The risk

Although the FSA does not regulate land as a 'specified investment,' there is a risk that many of these schemes are in breach of the financial regulation regime if they are structured as a 'collective investment scheme'. To operate and promote such a scheme legally the operators of the scheme would need to request and obtain authorisation from the FSA which would then regulate these firms. Generally these Landbanking schemes are not authorised by the FSA.

Read the full text here

You can find further information and guidance on when a Landbanking scheme may amount to a collective investment scheme in the FSA Handbook in the website.

Before you buy such investment it is better to contact the Financial Authority Services consumer helpline at 0845 606 1234 for advice.


No comments: