Why Land Is worth so Much
I own a plot of land, and it isn’t huge. As I stood there, it was hard to imagine how it’s worth so much1. It’s just a bunch of dirt! There’s nothing built on it that generates revenue, like an office.
But there’s a better way to look at it: suppose you’re running a business, and you consider buying a machine that generates a certain income per month for its lifetime of 4 years. Now imagine you’re offered an alternative machine that will generate the same monthly income but for 8 years. You’d be willing to pay more, wouldn’t you? What if it were 40 years? Even more! Now imagine buying a machine that lasts forever. You’d be willing to pay much more for this machine.
Land is like that machine. It generates income forever. You can build a building that lasts decades and generate rental income every year. Then the site can be used for a small solar plant, earning income from selling electricity. Then for a small farm that generates income from selling vegetables. Then a shop. And so on, for generations and generations, over hundreds of years, in a country that might not even be India by then. When you add up all this income over eons, it will be a lot. Whoever buys the land from you is going to get a lot of income for infinity; that’s why he’s willing to pay you a lot today.
By the standards of routine expenses like a car.