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
agricultural land
7 February 2019 - 14:00, by , in NRI, No comments

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

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

A plot of 120 sq yds in Lucknow’s city area, for example, costs rupees 8-18 lakhs. In contrast, agricultural land can be bought for rupees 1-8 lakhs, per acre, depending on the location and closeness to the city. The scene is similar in most metro cities.

Though, buying agricultural land can be tricky.

 

Potential ROI on agricultural land

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’s okay, 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 the future.

Advantages of investing in agricultural land

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

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

Disadvantages of buying It

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 get receive such an area, through a gift or inheritance.

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

Land Ceiling Act: Some states stricts 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 transferable. The property 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 purchase land through resale. While the value is still lesser 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 obtain agrarian land within the same town.

Prices of agricultural land are expected to hike, 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 order, for private and public projects. 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