Land banking is the technique of buying a vacant, abandoned, undeveloped plot of land and holding on to it until a future date (preferably when the site prices go up) and then selling it.
Land banking has witnessed several self-made billionaires in America like Donald Trump and Bob Hope who have bought large shares of empty land that had not yet seen any sort of development and received hefty returns when their site prices went up.
Land prices are always on the rise. On that account, land banking is a diligent strategy to invest during the soft market stages with less and gain more in the bear market.
With the additions of the right developmental and industrial/urban council sanctions, the value of the land goes up.
Land is sold by communities and government at higher-than-market-prices, with the POP (promise of prospect) that the land will sell at a better price tomorrow. Say 10-15 years from the date of purchase.
When buying an empty land, parameters like size, dimensions, topography, natural terrain, site orientation, neighborhood characteristics, utilities available, accessibility, title checks are to be triple checked, as most of these aspects have to be imagined, since usually there is no real development around these types of lands.
Despite the substantial risks involved, an increasing number of Americans are investing under land banking to benefit from the current land property market that would (with the right land and right approvals) be the face of future development sites bringing in more returns than the original stake of investment.