As an funding avenue, agricultural land affords good returns, significantly whether it is situated close to upcoming authorities infrastructure tasks corresponding to highways and airports. But there are state legal guidelines to deal with, and the definition of agricultural land varies. “For occasion, in Maharashtra, agricultural land is assessed as land used for cultivation or websites utilized by agriculturists for dwelling homes. Besides cultivation of crops, agricultural actions in such land embrace horticulture, backyard produce, grazing cattle, and many others,” added Harsh Parikh, accomplice at Khaitan & Co. Government paperwork additionally specify the class of land—whether or not it’s agricultural or in any other case.
Additionally, in accordance with tax guidelines, capital good points from the sale of agricultural land in rural areas are exempt from taxes. That situated in city areas are taxed.
If you might be a type of involved in shopping for agricultural land, it’s essential to know the numerous dangers related to shopping for land. As per a authorities launch, virtually 66% of civil fits in India are associated to land or property disputes, with a median dispute pendency of 20 years, in accordance with one research.
The major danger, particularly within the case of agricultural land, lies in guaranteeing a transparent title deed (extra about that later). There is want for an intensive due diligence as effectively.
Mint interviewed just a few individuals about their experiences with shopping for agricultural land. Industry specialists additionally weighed in on the elements to think about earlier than such an funding.
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What to look out for?
Shital Jain, a resident of Itarsi in Madhya Pradesh, is optimistic about investments in agricultural land, citing its increased potential for appreciation in worth. The 34-year-old, who holds an MBA finance diploma from Symbiosis International University and has labored 5 years as a analysis analyst monitoring fairness and commodities in Mumbai, invested in 4 acres of agricultural land three years in the past. Jain says the worth of his land has since doubled. He has now leased it to some farmers and this yields round 4-5% of the funding worth every year.
Jain, who joined his father’s commodity buying and selling enterprise just a few years in the past, could be very happy together with his funding, in contrast to his residential property in Mumbai, costs of which have remained stagnant for a very long time now. On prime of that, the upkeep prices are increased.
Jain emphasizes the significance of “arability, correct street connectivity, irrigation amenities, and entry to communication” before investing in farm land. In terms of managing it, he highlights the necessity of fencing along its boundaries, and ensuring access to water through tube wells. Note that Jain’s involvement in the agricultural business made it relatively easier for him to find suitable land and farmers for leasing.
Ayush Gaur, a BSc agriculture graduate from Udaipur, Rajasthan, had a different experience on both occasions that he purchased land for his dairy business. Over the past 3-4 years, Gaur acquired two plots of land. He bought the first plot in a remote village near Udaipur, but faced multiple challenges in setting up a dairy farm there. Also,the value of the land has not appreciated much over the years. He bought the second plot of land after six months of research. This plot, just about 20 km from Udaipur, ticked all the right boxes and its price has also risen.
“I realized the importance of location this time, and took the help of a local broker to find a suitable plot of land. Road connectivity, especially in the rainy season, is very essential for my business.” He additionally received the standard of soil examined to examine if it meets his necessities.
Vinit Matlani, a realtor based mostly on the outskirts of Mumbai, has been in possession of agricultural land for greater than 10 years now.
“Agricultural land is a profitable funding choice, however an investor should pay attention to the place and methods to purchase it, and the method to acquire a transparent title deed with none encumbrances,” Matlani, the owner of Rudram Realty, said.
Matlani believes that the title deed (the legal right to own land or property), is key to a good acquisition. “You have to check the mutation entries (government records that show the change in ownership of the property in the past), get old documents to verify how the transactions happened over a period of 30 or 40 years, and obtain details about the families that owned the land. All these need to be known before buying the land,” he added.
The dangers concerned
There isn’t any concrete information on precise returns from agricultural land. Also, most property house owners who talked to Mint emphasised the significance of a transparent title in land acquisition.
“As a purchaser, chances are you’ll not know if the particular person you might be shopping for the land from is solely entitled to the suitable on that property (as per succession legal guidelines) or if there are any claimants. You should depend on the income information however that itself will not be a foolproof doc,” said Parikh
Challenges also arise if the property has been partitioned by a joint family. In such cases, “ideally, there should be a relinquishment deed from those not entitled to such property. In the absence of such a document, we’ll never know if there is any aggrieved party who can go for litigation in the future,” mentioned Parikh.
It is advisable to ask for a probate doc from the vendor. However, usually, that won’t be out there. Further, in instances the place the owner and the farmer tilling the land are completely different, it must be ensured that the latter doesn’t have any occupancy tenant rights on the property (proper to domesticate on the land for livelihood regardless of not proudly owning the land), mentioned Parikh.
The different main concern in the true property market is using money transactions which can be unaccounted for. The stamp responsibility on buy of land must be paid as per the circle charge or precise worth of the transaction, whichever is increased. “Earlier, there was an enormous distinction between the circle charge and the market charge, as a consequence of which registrations occurred on the circle charge, whereas the stability was settled in money. But the scenario is bettering because the circle charges in and round metro cities are actually saved nearer to the market worth, reducing using illegitimate money transactions on this house,” said Sunitha Rajesh, partner, IndusLaw.
Note that both buyers and sellers involved in unaccounted cash transactions are liable to be prosecuted under the PMLA (Prevention of Money Laundering Act) rules. This is in addition to the investigations and penalties one would face under the Income Tax Act, added Parikh.
Regulations
There are certain regulations one must keep in mind when buying agricultural land. An NRI (non-resident Indian) cannot buy agricultural land in India without the consent of the Reserve Bank of India. They can, however, inherit such property.
Further, since agriculture is governed by state laws, “almost all states have some sort of regulation or ceiling on the extent of agricultural land that one can buy or hold. Many states also discourage buying agricultural land merely for the purpose of investment by imposing conditions on either or both acquisition and holding of agricultural lands,” mentioned Rajesh.
For instance, in Maharashtra, solely farmers can purchase agricultural land with out the consent of the district collector. For this objective, agriculturists are outlined as farmers who domesticate the land themselves. If both of the client’s mother and father or grandparents are agriculturists, then that particular person can also be entitled to purchase such land, mentioned Parikh. “There can also be a ceiling on the variety of acres of agricultural land one can maintain. In Maharashtra, it’s 54 acres.”
Do note that there is no centralized government website that publishes land prices and how they have moved historically. Due to the lack of transparent data, it becomes difficult for buyers and sellers to ascertain the price. “However, one can check the land prices on each state sub-registrar’s online portal or data of certain private agencies,” added Parikh.
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Updated: 04 Jul 2023, 12:47 AM IST
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