The pros and cons of buying agricultural land: A number of urban investors are investing in agricultural land, owing to the slump in urban realty and the promise of greater long-term returns.
You are here: Home \ NRI \ The pros and cons of buying agricultural land
15 January 2019 - 10:29, by , in NRI, No comments

 

There is an inclining demand for such land parcels, owing to the scarcity and high price of land in cities, with urban investors buying it to earn rewards on resale or use it for cultivation.

Many investors feel that buying agricultural land in neighbouring districts of tier-1 and tier-2 cities and rural areas, is the best investment alternative in the prevalent market conditions. Although agricultural land has always been considered as one of the best long-term investment options, it has become sought after now, due to the slump in urban realty markets.

For example, a plot of 120 sq yards in Lucknow’s city area, costs Rs 8-18 lakhs. In comparison, agricultural land can be bought for Rs 1-8 lakhs, per acre, depending on the location and proximity to the city. The scenario is similar in most metro cities.

However, buying agricultural land can be tricky.

 

Potential ROI on agricultural property

The returns are higher in trending and developing areas, where there is a possibility of upcoming infrastructure projects, such as an exclusive economic zone or a highway.  It is good, if the land is located in an area where some government scheme is to be launched, or if it is included in the master plan of the region. The chances are that such a piece of land will fetch a higher value, in future, he adds.

 

Advantages of investing in agricultural property

An agricultural land plot can guarantee long-term returns if it is in an area where the government has planned some infrastructure project shortly.

Moreover, the compensation, in the case of acquisition by the government, is higher for rural land than that for an urban land. A number of state governments are also planning a land pooling policy, for areas where city is expanding. If you become an owner under the land pooling policy, you will get a guaranteed regular returns from the pool.

 

Disadvantages of buying agricultural property

Not everyone can buy: As per the law, you need to be a farmer to own agricultural land in India. While most states have such a ruling, some have eased this prerequisite. You may also receive such an area, through a gift or inheritance.

Conversion is not easy: You cannot convert a fertile piece of agricultural land into a residential one. The property should be dry land, for translation.

Land Ceiling Act: Some states restrict the ownership of land. Therefore, check how much can be bought in that state.

 

Check applicable laws

Evaluate other applicable laws about the transfer of the rights to the land, ownership records of the property and leases, if any. Often, such plots of agricultural land may not be transferrable. The area may also be a leased one. In such cases, make sure that the tenants do not have any rights over the land and only enter into the transaction after all such issues are cleared.

 

Trends

Investors in this segment, are either buying dry converted rural land or are buying land through resale. While the value is still lower than land plots in the city area, these investors become owners of land in a rural area. This way, they become eligible for buying more actual agricultural land. Some people also buy a small piece of residential property in a village and use this residential address, to buy agricultural land within the same town.

Prices of agricultural land are expected to increase, especially around urban areas, owing to the growing demand for affordable housing, which is only feasible along the outskirts of metro cities. Land in such areas is also in market, for public and private projects, adds Gaurav. Nevertheless, you will need to spend a substantial amount to buy the land, and hence, you should cover all the risks, before you enter the deal.

About author:

Leave a Reply