The Pros, Cons, and Costs of Investing in Agricultural Land

Entrepreneurs in India are increasingly looking for creative solutions to generate returns on their investments due to the country’s rising purchasing power. The purchase of agricultural land is one such strategy. While some investors maintain such land as a commodity, another group uses the expanding organic food market to bolster their revenue. According to many experts, investing in farmland is a safe place to deposit money because they typically yield larger returns than other assets and provide investors with financial security.
Many urban people in business in India anticipate the possible returns from the many agricultural property types located in the suburbs and surrounding areas of major cities. Due to the rising cost of land in cities and its scarcity, the market saw an increase in demand for these types of agricultural land. Urban investors can buy it to cultivate it themselves or sell it for a profit. In comparison to urban land, agricultural land is more affordable. Regarding resale value, the investors anticipate some extremely good returns.

Is Investing In Farmland A Good Idea? Benefits of Buying Farmland for Investment

Suppose a tract of agricultural property is located in an area where the federal and state government has declared some infrastructure projects that will be finished shortly in the future. In that case, it undoubtedly offers some long-term returns. Your asset would not depreciate over time, as is true for all types of land-related developments. However, this isn’t entirely accurate regarding apartments, flats, etc. The building’s quality and overall structure deteriorate with time, and the owner is forced to spend significant money on upkeep. In addition to saving, you money on maintenance expenses, investing in high-quality, rich agricultural property in a favourable location also gives you the freedom to use that particular plot of land for various purposes down the road, this farmland investment strategy has made many Indians in tier 2 and tier 3 towns rich! 

Investment in agriculture land can be a good idea for several reasons. Here are some benefits of buying agricultural land in India

• High appreciation rate: Agricultural land in India has been known to appreciate at a faster rate than other types of property. According to recent reports, the appreciation rate of agricultural land in India is around 10% to 12% per annum.

• Tax benefits: Investing in agricultural land can provide tax benefits. For example, income from agricultural land is exempt from tax under certain conditions.

• Diversification: Investing in agricultural land can be a good way to diversify your portfolio. This can help reduce risk and improve returns.

• Security: Agricultural land is a tangible asset, which means that it is less susceptible to market fluctuations and economic downturns.

Commercial Benefits of Agricultural Land

Even if purchasing a property piece or plot offers numerous advantages, one may think is it good to invest in agricultural land in India, particularly if it is agricultural land; there are also certain hazards associated with such purchases. This is especially true if the buyer does not pay close attention to the property’s documentation. States have made it simpler for investors to discover all land-related information on the web, but it still requires a lot of attention to ensure that all the paperwork is in order and that there are no forgeries.
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The advantages of investing in the agricultural real estate market are as follows:

• Because the cost of creating the land is split among the owners, the total amount of the property is lower. As a result, an investor must pay less for these plots.
• Due to the growth of organic farming and changes in consumer tastes and inclinations, the returns on capital are better than those of stock and share investments. Investors’ efforts and overall expenses are lower with this investment in agricultural land than with any other, but the profits are higher.
• Contrary to apartments or homes, there are two main advantages of purchasing agricultural lands: Firstly, one might save money by not having to pay for its upkeep, and secondly, agricultural fields do not
• Contrary to apartments or homes, there are two main advantages of purchasing agricultural lands: The costs associated with maintaining it can be avoided, and agricultural land does not lose value. Investors need not be concerned that the plot’s price may drop over time.

How Can You Turn Your Land into a Successful Investment?

You can use the following strategies to make your land investment a successful business:

• You may be able to rent it out for neighbourhood gardening, depending on where you are.
• Start a blog to document your most recent farming exploits.
• Create a beehive farm and make it a tourist attraction.
• Grow distinctive flowers to sell at the neighbourhood market if the soil is fertile.
• Online seed sales for plants.
• Offer to help with pet sitting or childcare and recoup the 1-acre agriculture land price paid by you with goodwill.
• Herbs can be grown and sold online.
• Purchasing farmland as an investment can be profitable by giving farm-related tours or classes.
• Utilise the land to produce solar power.

Steps To Follow While Investing In Agricultural Land In India

If you are considering investing in agricultural land in India, here are some steps to follow:

• Research: Conduct thorough research on the land you are interested in, including the location, soil quality, and availability of water.
• Legal verification: Ensure that the land has a clear title and that there are no legal disputes or pending litigation related to the land.
• Soil testing: Conduct soil testing to determine the quality of the soil and its suitability for farming.
• Budget: Determine your budget and ensure that you have enough funds to cover the cost of the land, as well as any additional expenses such as fencing and irrigation.
• Documentation: Ensure that all documentation related to the purchase of the land is in order and that you have all necessary permits and approvals.

Government Rules for Making Agricultural Land into Non-Agricultural Land

In India, the agricultural property cannot be developed for residential or commercial purposes without first undergoing a legal “change of land use.” By completing an application form and forwarding it to the Commissioner of the Land Revenue Department, you can request a change in land use. Still, you must include all the justifications for the conversion.
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The following paperwork must be supplied along with the conversion application form:

• The First Sale Gift deed, partition deed, or deed
• The Letter of Mutation
• An official survey maps
• Most recent tax receipts
• Identification Documentation

A charge must be paid if agricultural land is converted to non-agricultural land. The property’s location and type influence the costs. It is necessary to provide information on the land parcel size, any outstanding loans, the crops and soil types on the property, and the past and current owners’ contact information. The Tahsildar office and, indeed, the Revenue Office both sell scanned copies of these documents. Unpaid dues must be paid immediately, and duplicates of the payment receipt must be included.

Documents To Check Before Buying Farm Land as an Investment

Below is a summary of the paperwork you’ll need to purchase and invest in agricultural property. The state may affect how this varies:

• 8A excerpt
• Tax receipt for land revenue
• Town map (gaon naksha)
• Soil test results
• First title deed
• Obligation certificate
• Deed of registration or conveyance, if any.

Price Of Investing in Agricultural Land in Metro/Top Cities

A one-time mandatory cost must be paid to obtain the land conversion certificate. This fee differs from state to state, district to district, and locality to locality. In Andhra Pradesh, for instance, three percent of the land value must be payable as the conversion price. In Haryana, there is a fee of Rs 210 per sq. metre to convert public land to residential use. In Rajasthan, the cost to convert an agricultural plot into a residential one ranges from Rs 60 to 200 per square yard. The costs for converting land for commercial use range from Rs 400 to Rs 800 per square yard.

In Delhi, supplementary Floor Area Ratio [FAR] charges have been set at Rs 3,039 to Rs 7,597 per square metre in various industrial sectors, and conversion fees for approving residential use range from Rs 14,328 to Rs 24,777 per square metre. Bihar requires a conversion fee of 10% of the property value. Please note that the payment receipt must be kept safe as it is documentation that your application has indeed been received. However, it could take a while before the applicant can obtain the certificate. For instance, the Bombay Land Revenue Code, 1966 stipulates a 90-day window during which the order for conversion must be issued.

Nevertheless, it could take up to six months to receive approval, according to documentary maker Shahid Parvez Sayyad, who purchased a piece of agricultural land in Aurangabad to build a home. After the collector obtains your application, a laborious process begins verifying these documents’ legitimacy. This also includes a staff visit to the site.

Agricultural Property for Construction

The fact that several state governments are now opening up farmlands for housing growth and industrial reasons may make this opportunity very profitable for investors considering purchasing an agricultural estate in rural areas close to the city. According to a recent announcement from the Gujarat state government, real estate developers will be authorised to buy agricultural property for cheap housing under the Gujarat Tenancy Act. Similar changes were made to the land reforms act in Karnataka by the state government, which liberalised farmland ownership and expanded the ability for non-agriculturalists to own agricultural land. This may only be the beginning, and very shortly, other states may release farmland for real estate development, increasing supplies.

Always make it a point to avoid these blunders when purchasing farmland

• It is essential to consider the significance of land titles. Before buying any farmland, be sure the title is clear. This has two advantages: first, it assists in avoiding legal issues, and second, it speeds up land acquisition.
• The farmland regulations should be understood by buyers, especially if they are from another state. The state governs agricultural farmlands; hence regulations may range from one state to the next. Before buying agricultural land, it is crucial to review the current rules.
• Additionally, buyers should be sure to inspect the property in person and research its specifics. This is crucial for agricultural land since the buyer must know the soil’s quality and other relevant aspects.

What is a Change of Land Use (CLU)?

Land use refers to the activities that take place on a piece of land. Land can be used for various purposes, including residential, commercial, industrial, agricultural, and recreational purposes. When a change of land use occurs, it means that the land is being used for a different purpose than it was originally intended for. For example, if a piece of land was originally intended for agricultural use, but is now being used for commercial purposes, this would be considered a change of land use.

Disadvantages Of Investing in Agricultural Land

There are several drawbacks to purchasing agricultural land. The main drawbacks are:

• Just no one can purchase agricultural land; rather, you must be a farmer to possess farmland anywhere in India, according to the current legal framework. While many Indian states still follow this regulation, some have done away with it. Agricultural land can also be legally transferred to you as a gift or an inheritance.
• Conversion is challenging since you cannot turn a fertile agricultural plot of land into residential property. Considering converting a piece of property from agricultural to domestic use, it must be dry land.
• Some Indian states have restrictions on land ownership under the Act of Land Ceiling. You must thus confirm the maximum amount of land which can be bought in that state.
• In accordance with Indian law, If you want to know how NRIs invest in agricultural land in India, then it is sad to know that NRIs are not permitted to buy any agricultural land in India.
• It is important to be knowledgeable about the local legislation – If one is unfamiliar with local agricultural land rules and the jargon frequently employed in transactions involving investing in agricultural land, buying agricultural land may be very challenging. This differs from one Indian state to another because each state’s constitution matters.
• For example, understanding the land parcels you are buying requires in-depth local knowledge of the measures of the area. You may get a good estimate of the price per square foot you will ultimately pay by understanding how these specific units are converted to several commonly used units of measurement. 
• The land buyer must be well-versed in the maths to convert “gaj,” the regionally common property measurement unit in a given location, into square feet or square metres. This would make it possible for a user to comprehend the cost per square foot of that agricultural area.

Cheapest agricultural land in India

The cost of agricultural land in India can vary greatly depending on factors such as location, soil quality, and availability of water. However, there are some regions in India where agricultural land is relatively cheap. For example, according to recent reports, agricultural land in regions such as Madhya Pradesh, Uttar Pradesh, and Rajasthan is relatively cheaper compared to other parts of the country.

Agro-Real Estate Trends

Investors can purchase dry transformed rural land or land through resale in this market. These investors acquire land in a rural region, while the value is still lower than land plots in the city. As a result, they are qualified to purchase more actual agricultural property. A few people also purchase a modest piece of residential real estate in a village and then use this address to purchase agricultural land in the same community. Due to the rising demand for inexpensive housing, which can only be built outside major cities, agricultural land prices are predicted to rise, especially in the vicinity of urban centres. Both governmental and commercial projects need land in these locations.

Farm land appreciation rate in India

As mentioned earlier, the appreciation rate of agricultural land in India is around 10% to 12% per annum. This rate is higher than the appreciation rate of other types of property such as residential and commercial property. According to recent reports, the appreciation rate of agricultural land in India has been steadily increasing over the years.

The State of Agro Real Estate Investments Following COVID 19

There are several causes and chances for the Indian agro realty market to grow. People are attempting to switch to consuming organic products with fewer artificial chemicals since most businesses put a lot of chemicals on food products, particularly perishable ones. This is, so they don’t negatively affect the environment or human health. Due to the pandemic, these worries have grown quickly, and individuals are switching to eating healthier foods.

Due to the downturn in urban real estate and the possibility of higher long-term profits, many urban investors are now investing in agricultural land. Therefore, we looked at the advantages and disadvantages for people looking to purchase agricultural land and how to invest in agricultural land. Indian investors are looking for novel concepts to increase the returns on their investments. The purchase of agricultural land is one such strategy. While some investors may find it easy to buy agricultural land, many real estate investors need professional help too. Fortunately, NoBroker has real estate experts who will help you understand the legal requirements and help you along the way. If you’re interested in seeking consultation, please comment below this article; our executive will be in touch with you soon. 

Frequently Asked Questions About Investing in Agricultural Land

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