Investors in India are now looking for creative ideas to generate returns on their investments due to the country’s rising purchasing power. One such method is to buy agricultural land. While some investors keep such land as an asset, there is another group that uses the expanding organic food market to bolster their income. Farm investments are a safe place to park money, according to several experts, because they typically yield higher returns than other investments and provide investors with financial security. In India, many urban businesspeople are interested in the potential returns from the various agricultural property types found in and around major cities. The market witnessed an increase in demand for these kinds of agricultural land because of the rising cost of land in cities and its dearth. It can be purchased by urban investors to cultivate it themselves or to sell it for a profit. Agricultural land is more affordable than urban land. The investors anticipate some particularly good returns in terms of resale value. This article will discuss the advantages and disadvantages of buying agricultural land, as well as a few other important things to consider when investing in agricultural land, which will be supported by relevant judgments.
Advantages of Purchasing Agricultural Land
You have no restrictions on how you can use the land to make money once you own it. Now that the new land standards are in place, you can also form a joint venture with another person to double your profits in the future.
The resale value is high.
Because there is a limited supply of land now, competition has skyrocketed. As a result, buyers are willing to pay more for your land. Furthermore, when agricultural land is compared to constructed land, the former has a higher rate of appreciation. This is because agricultural land does not change and tends to remain in its original state.
The only additional maintenance costs associated with purchasing agricultural land are mowing, fencing, and hiring a guard to ensure safety. Because redesigning or repairing is not an option, it saves a significant amount of money, time, and effort.
Lower investment costs
It is indeed true that vacant plots of land are less expensive than built-up areas. This benefit is especially beneficial for people who are just starting in the real estate investment industry. While purchasing a built property in a city may be difficult, purchasing an agricultural plot is much easier and less expensive.
The digitization of land records and maps has increased transparency and made the sector easier to navigate. Digitization allows for the simple translation of all these land records into various languages. This will not only increase clarity in the sector, but it will also make investing in agricultural land a much more appealing option.
Disadvantages of Purchasing Agricultural Land
Not everyone can purchase
To own agricultural land in India, you must be a farmer, according to the law. While most states have such a requirement, some have relaxed it. You can also obtain such land as a gift or inheritance.
Conversion is difficult
A fertile piece of agricultural land cannot be converted into residential land. For conversion, the land should be dry.
Act Concerning the Land Ceiling
Several states place restrictions on land ownership. As a result, determine how much can be purchased in that state.
Not everyone can buy
NRIs, for example, cannot purchase agricultural land in India.
It is necessary to be familiar with local land laws and terminology
Purchasing agricultural land can be extremely difficult if the buyer is unfamiliar with land laws and the local jargon used during the transaction. Because land is a state subject, laws vary by state, and not having a thorough understanding of the legalities involved in the process will be detrimental. Knowledge of local land measurement units, for example, is required to have a clear understanding of the size and scope of the land parcel you are purchasing.
Knowing how to convert these units to globally accepted measurement units will also give you an idea of how much you will pay per square foot.
If the local land measurement unit is gaj, for example, the buyer should be aware of the gaj to square foot/square meter conversion. This would allow him to estimate the land’s price per square foot.
Now that one is aware of all the benefits and drawbacks associated with purchasing agricultural land in India, one is prepared to get started. However, the land-by-process is not only time-consuming but also labor-intensive. To put it mildly, it takes days or months to complete background checks and figure out all your legal obligations. Mistakes are inevitable if one jumps into the process without having a solid understanding of how one should approach the purchasing process. Let’s look at some common mistakes that one can learn from and undoubtedly avoid when the time comes since there is one standard procedure in India for purchasing agricultural land.
Common Mistakes to Avoid While Buying Agricultural Land
Unaware of the seller
The history of the land is frequently used as a basis for final decisions, but the history of the land’s previous users is more important. You have the right and obligation to demand information about the previous landowner.
Regarding the documents required to be eligible for the purchase of this type of land, there is perpetual confusion. The following is a list of essential documents that will be useful regardless of state variations.
• 8A sample
• Land revenue tax receipts
• City map (gaon naksha)
• Results of soil tests
• original title deed
• certification of obligation
• If applicable, registration deed or conveyance
Failure to conduct a physical land survey
Most people make the mistake of believing that knowing the history of a place is sufficient. However, you will not know if the land is suitable for your needs and requirements until you physically assess it.
Ignoring the importance of uncontested land titles
Before signing the final purchase agreement, double-check the land’s title. If there are any disagreements over the titles, you will face legal issues in the future. The title verification should be at least 40 years old. These 40 years must be counted from the date of land purchase.
a) According to the Supreme Court, giving agricultural land to a non-agriculturist as part of a will is not legal. In Vinodchandra Sakarlal Kapadia v. State of Gujarat (2020), the Court applied the provisions of the Bombay Tenancy and Agricultural Lands Act, 1948 as they applied to the State of Gujarat to reach this determination.
b) In the case Md. Kausar Ali v. State of Jharkhand (2020), The court determined that both sale deeds were for the same property. It was also determined that the basic requirements of Sections 427 and 447 of IPC were met and that the petitioner’s actions caused wrongful loss to the complainant and rendered the land infertile and unfit for cultivation. It was also decided that because the basic elements of an offense were present in the case, the dispute would not be considered civil simply because it involved land.
c) The Supreme Court issued a significant decision concerning ‘Ancestral Agricultural Land.’ If the Hindu heir wants to sell his share of ancestral farm land, he must give preference to a family member. In the case of Babu Ram v. Santokh Singh (deceased) through His LRs and others (2019), the successor will be unable to sell his property to an outsider.
Investing in agricultural land requires a significant amount of capital. Before investing in agricultural land, investors should have a clear financial plan in mind. Furthermore, investors must maintain realistic expectations from their investment, as farmland returns are not as appealing as previously believed. Agricultural land is typically regarded as a good investment for high-net-worth individuals and those with surplus income. Going through this process will be time-consuming and exhausting for salaried or self-employed individuals living in cities.
- Babu Ram v. Santokh Singh (deceased) through His LRs and others (C.A. No. 2553 of 2019)
- Md. Kausar Ali vs The State Of Jharkhand (Cr. Rev. No. 229 of 2014)
- Vinodchandra Sakarlal Kapadia vs State Of Gujarat (C.A. No. 2573 of 2020)
- Pros and Cons of Buying Agricultural Land in India, clicbrics.com (Jan 14, 2022) https://www.clicbrics.com/blog/pros-and-cons-of-buying-agricultural-land-in-india (Last visited Sept.28, 2022)
- The Pros and Cons of Buying Agricultural Land, housing.com (July 10, 2022) https://housing.com/news/pros-cons-buying-agricultural-land/ (Last visited Sept.28, 2022)
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