Buying an Agricultural Land in India

Due to higher Return on Investments (ROI) buying agricultural land has become developers' and Investors' first choice, today. Many have stated organic farming because organic products are gaining popularity among people, steadily increasing their demands. Organic vegetables, fruits and organic grains can also additional income to farm owners.

Many opting for such farming investment feel it is a safer option to invest in the real estate sector. Which is also popular as the agro-realty. The market for such investments is growing, particularly after the COVID-19 pandemic.

While the land in rural areas is relatively less expensive as compared to Urban properties. Investors invest in such areas with the expectation of good ROI with higher property resale value.

Agricultural lands are in high demand, following the scarcity and high price of urban properties. The developers' latest trend is to either resell the property and make profits or perform cultivation.

"Numerous investors are heavily investing in the agriculture land in the tire-1 cities and tire-2 cities in Bangalore's neighbourhood. They feel that it is the best long term alternative investments available in the current market conditions. It has become well sought after now, due to the decreasing urban realty markets." Says, A Member of MCHI.

For instance: - a plot of 1200 sq ft in Lucknow's city area costs around INR 8 to 18 lakhs. Whereas agricultural land can be purchased for INR 1-8 Lakhs per acre which depends on the region, the location, and the city's vicinity. Which is common across the cities of the country.

ROI on Agricultural Land

Returns On Investment (ROI) on agricultural land are increasing with time and many areas with possibilities of upcoming infrastructure projects. For Instance, The Jewar Airport site are rising up after the announcement of the Second airport in Noida.

"A Delhi based Real Estate Consultant, explains that if the land is located in the area where some government projects are about to be launched or if it is included in the layout planning. Possibilities of such properties will give you good ROI in the future." He says.

Advantages of Investing in Agricultural Land in India

Investing in agricultural land can assure long-term returns, especially when the government announces infrastructural projects in the future.

The compensation for land acquisition for rural agricultural land is higher compared to urban land. Many state governments are also planning on introducing land-pooling policies for areas where cities are widening. Landowners, under the land-pooling policy, are guaranteed regular returns from the pool.

The appreciation is true in case of all land developments. The land value is very unlikely to depreciate with time - the same does not apply to apartments, flats, etc... With passing time, these structures deteriorate and also require heft money for their maintenance.

Instead, investing in agricultural land can save you from spending all the money but also the land can also be used for various purposes adhering to all the agricultural land norms.

Disadvantages of Buying Agricultural Land in India

While many advantages accompany its disadvantages, here are a few disadvantages you must be aware of before you decide to buy agricultural land:

• Not everyone can buy agricultural land, you need to be a farmer to own an agricultural land.

• Conversion is not easy: Converting fertile and cultivable land is extremely difficult. the land must be proved dry and unfit for cultivation.

• Land Ceiling Act: Many states restrict the ownership numbers. It is important to verify before purchasing any agricultural land.

• Not Everyone can buy: NRIs cannot buy land in India.

• Understanding local laws, terminology is important: Terminologies such as Measurement, the total area in sqft, acer, price of land, etc...

Documents that are essential when buying agricultural land

Here are some of the documents that are essential for buying agricultural land in India, Viz:

• 7/12 Extract

• 8 A Extract

• 6/12 Extract

• Village - Gaon Naksha

• Tax paid receipt

• Soil testing report

• Original Title deed

• Encumbrance certificate

• Conveyance deed (optional) /Registration

Buying Agricultural Land in Karnataka

Indians and NRIs can purchase non-farming land in Karnataka. However, there are certain restrictions on purchasing farming/agricultural land.

Before 2015, only individuals with an agricultural background could purchase agricultural land in Karnataka.

People with non-agricultural backgrounds refer to individuals who don't have any agricultural inheritance, own agricultural land or who have not earned more than 2 lakhs for a year in agricultural land.

In 2020 the Karnataka Government abolished the 2-decades old law. Today, there are no restrictions on who can purchase and sell non-agricultural land in Karnataka.

Non-agriculture-based institutes, namely - corporations, or academic institutions in India, etc...

Legally, anyone with a maximum non-agricultural income of 25 lakhs per year can own agricultural land, irrespective of their background. In June 2015, the baseline income was raised from 2 Lakh to 25 Lakh.

The district commissioner has the authorisation to grant agricultural property ownership to non-agriculturalists.

Documents Required for Purchasing Agricultural Land in Karnataka

Below mentioned documents are essential for either buying or selling agricultural land in Karnataka:

• Document of Right to sell the property and seller's identification

• Sales contract - Including selling price, Timing, and Advance Payment made

• Stamp Duty paid receipt

• Registries of Property

• Deed of Title in Original Form

• Past Deeds

• Tax payments

• Two witnesses are compulsory for property registration

• Deed to transfer the Title of the property, from seller to buyer during real estate transactions

• Patta book (EC) Conveyance document

• NOC from Tehsildar

• Documents for record of rights

• Extract from the Mutation Register

• Records of Survey

  • HISS Tippani and Hissa Survey Sketch

  • Akaraband

  • Atlas

• Map of the village

• Family tree

• Identification card - Aadhar Card, Pan card, or Election Identity card.

• Death certificate (relevant)

• Other Documents that are relating to the property ownership proof

Conclusion:

The stringent law in property buying came into practice, as a remedy for the land scams that took place in the state and in the rural regions across the country.

Many buy agricultural land and fake documents by stating that the lands were unfit for cultivation, make layouts and sell them at higher prices. The government to avoid such misshapes land scams and also to eliminate land conversions introduced regulations in land buying processes.

Until 2020, Non-agriculturists or people without agricultural backgrounds were unable to purchase agricultural land in Karnataka. In 2020, Karnataka abolished the old law prohibiting non-agriculturalists from purchasing or selling agricultural land.

In the recent day, there are no such restrictions on who can own agricultural land in Karnataka, including Non-agricultural institutes, corporations etc.,

People with a non-agricultural income of 25 Lakhs per year can own farmlands, regardless of their non-agricultural family background. In June 2015, the income threshold was risen from 2 lakh to 25 lakh.

FAQs

Q. Is buying agricultural Land a good investment?

A. Buying Farmland is a good investment. Especially land that is closer to approved government projects, with rising property value, which can fetch good ROI.

Q. Is buying agricultural land tax deductible?

A. According to Section 54B: The LTCG arises from the transferring the agricultural land used for farming purposes. If the assessee has, within a period of two years after that date, purchased any alternative land for agricultural purposes, then a correlative deduction will be available to the extent of LTCG invested as prescribed.

Q. What happens if Stamp duty is not paid?

A. When you don't pay appropriate stamp duty on land, the collector can impose a certain penalty, which can be the difference of the amount of the insufficient stamp duty. The penalty can vary anywhere from INR 500 to 10 times the difference of the stamp duty.

Q. What is the difference between Stamp Paper and Stamp Duty?

A. Stamp Duty is the tax which is paid by the property buyers and the Stamp Papers are the stamp paper is the paper with furnishes the details of the property seller and the buyers. Stamp papers come in different denominations.