With real estate prices hovering around historical highs in most urban areas, traditional property investors are looking at other viable options. One idea floating around these days is buying agricultural land, which experts say, may not weigh too heavy on your pocket. It could also be a source of tax-free income, they say. However, buying agricultural land is not an easy process like finalising an apartment. There are a host of issues, most importantly legal ones, to tackle before owning a piece of verdant land. "Buying agricultural land is the most sensible thing to do, though there are many issues involved,"
To begin with, almost all state laws allow only farmers to buy agricultural land. "To protect agriculturists, legislations in each state in India have set out that agricultural land can be used for such purpose only. For acquiring such land, a common attempt is to bracket yourself as an 'agriculturist' even if you don't fall in that category," Now, there are two ways to do it: one, you have to show that your father or grandfather was a farmer. Two, you have to show that you already own some agricultural land. It is almost impossible to change your father's and grandfather's occupation, if they are not farmers. That is why most people try the second route. "Many people have bought land that is totally uncultivable to get the status of a farmer. Thereafter, they buy good agricultural land for cultivation. This is very common," says a lawyer who doesn't want to be named.
Another method is to buy land in the name of an actual farmer and then share the profits. "This procedure is usually contractual, it may not necessarily be illegal, but it is also difficult to justify if it is legal," Bhakta suggests a clean and legal way to do it, which may save you many headaches in future. "If you don't declare yourself as a farmer, and you still want to acquire such land, then you need to apply for conversion of the land. That is, change the use of land for non-agricultural purposes," he says. Land can be used for purposes other than cultivation only after prior permission (usually from the collector) for such conversion is obtained, he says. But this is an extremely tedious process and may take a few years to complete.
Location And Area
Needless to say, agricultural land (that too, vast tracts of land) is unlikely to be a small drive away from your home. As a rule, don't consider the distance from your home as the primary concern while scouting for agricultural land. "Distance from farm land is of no major consideration. Access from the main road, visibility from various roads, availability of or accessibility to electricity and water for the site should be kept in mind,"
To begin with, almost all state laws allow only farmers to buy agricultural land. "To protect agriculturists, legislations in each state in India have set out that agricultural land can be used for such purpose only. For acquiring such land, a common attempt is to bracket yourself as an 'agriculturist' even if you don't fall in that category," Now, there are two ways to do it: one, you have to show that your father or grandfather was a farmer. Two, you have to show that you already own some agricultural land. It is almost impossible to change your father's and grandfather's occupation, if they are not farmers. That is why most people try the second route. "Many people have bought land that is totally uncultivable to get the status of a farmer. Thereafter, they buy good agricultural land for cultivation. This is very common," says a lawyer who doesn't want to be named.
Another method is to buy land in the name of an actual farmer and then share the profits. "This procedure is usually contractual, it may not necessarily be illegal, but it is also difficult to justify if it is legal," Bhakta suggests a clean and legal way to do it, which may save you many headaches in future. "If you don't declare yourself as a farmer, and you still want to acquire such land, then you need to apply for conversion of the land. That is, change the use of land for non-agricultural purposes," he says. Land can be used for purposes other than cultivation only after prior permission (usually from the collector) for such conversion is obtained, he says. But this is an extremely tedious process and may take a few years to complete.
Location And Area
Needless to say, agricultural land (that too, vast tracts of land) is unlikely to be a small drive away from your home. As a rule, don't consider the distance from your home as the primary concern while scouting for agricultural land. "Distance from farm land is of no major consideration. Access from the main road, visibility from various roads, availability of or accessibility to electricity and water for the site should be kept in mind,"
The size of the plot you buy is also important. Experts believe you should go for a large land parcel so that you can carry on agricultural activities in full swing. Narayan of Knight Frank says, "You need a large parcel of land of about 50-60 acres."
Legal Issues
Once you have zeroed in on the land, you have to turn your attention to the most important hurdle you may have to surmount: the legal issues. Tell yourself again and again that this is the most crucial step involved in buying a piece of agricultural land. Narayan suggests an easy way out: "Ask a sound law firm to do due diligence. Ensure that the title of the land is clear. If you do not have the wherewithal to check the legal issues, then engage a proper realtor or local broker to check them." "The most common mistake is that people don't see if the land has been properly acquired or not, whether the farmers have been rehabilitated or not. There can be numerous problems. You buy land and then realise there are many issues,": "Study the state bylaws before buying agricultural land. Land should not have any encumbrance or litigation on it. Also, have a thorough title due-diligence done on the land with at least 30 years historical title check done. There should be no minor, etc, as owner of the land. Make sure that there are no village roads/lanes, well, etc, on the land and there are no LT/HT electrical wires running thought the land." Get your land demarcated clearly, and ensure that the seller gets the boundary wall or fencing done before the title is transferred, he says.
Legal Issues
Once you have zeroed in on the land, you have to turn your attention to the most important hurdle you may have to surmount: the legal issues. Tell yourself again and again that this is the most crucial step involved in buying a piece of agricultural land. Narayan suggests an easy way out: "Ask a sound law firm to do due diligence. Ensure that the title of the land is clear. If you do not have the wherewithal to check the legal issues, then engage a proper realtor or local broker to check them." "The most common mistake is that people don't see if the land has been properly acquired or not, whether the farmers have been rehabilitated or not. There can be numerous problems. You buy land and then realise there are many issues,": "Study the state bylaws before buying agricultural land. Land should not have any encumbrance or litigation on it. Also, have a thorough title due-diligence done on the land with at least 30 years historical title check done. There should be no minor, etc, as owner of the land. Make sure that there are no village roads/lanes, well, etc, on the land and there are no LT/HT electrical wires running thought the land." Get your land demarcated clearly, and ensure that the seller gets the boundary wall or fencing done before the title is transferred, he says.
Managing Your Land
Before signing the cheque for the purchase, you need to carefully plan how you are going to take care of the land. Living in a city and taking care of a land far away won't be an easy task. Narayan suggests a viable solution: "You can hire contract farming firms that will man age the land for you. These contract farming firms may be on a profit-sharing basis. Prior to the acquisition of the land, a contract farming firm could do the testing of the soil to determine what crop can be grown."
Security Issues
Security issues related to such land are usually more complex, feel experts. "If you buy land in a community society then at least there is somebody to look after the land. But if you buy an independent plot, then there is the problem of guarding it as well, which can become very costly," . "Get the fencing and security right, it is very important," "Prima facie, one needs to make sure that there is no land grabbing or the neighbour doesn't extend the boundaries to your land. Hence, basic costs are for creating a boundary wall and a guard,"
A Home Away From Home
But don't start building holiday home in the air, though. Laws prohibit building of holiday homes on agricultural land. "A farm land is ideally a piece of land where you can do farming. It should not be confused with a holiday home. Different states have different laws for conversion of farm land into a holiday home, motel, hotel. There is a process laid down by each state which governs the change of land use." So, before you build a holiday home, study the laws of the state where you plan to buy the land. Narayan of Knight Frank warns that holiday homes are not great investment options. "A holiday home is mainly a lifestyle option. There's not much scope for investment in such a home because the liquidity is not great." But make no mistake, land is always a valuable investment. "Holding land may be sensible, given the increasing demand for food grains," says Narayan. "If you have already bought land, it is better to hold on to it as the purchase cost is not likely to be very high," .
Before signing the cheque for the purchase, you need to carefully plan how you are going to take care of the land. Living in a city and taking care of a land far away won't be an easy task. Narayan suggests a viable solution: "You can hire contract farming firms that will man age the land for you. These contract farming firms may be on a profit-sharing basis. Prior to the acquisition of the land, a contract farming firm could do the testing of the soil to determine what crop can be grown."
Security Issues
Security issues related to such land are usually more complex, feel experts. "If you buy land in a community society then at least there is somebody to look after the land. But if you buy an independent plot, then there is the problem of guarding it as well, which can become very costly," . "Get the fencing and security right, it is very important," "Prima facie, one needs to make sure that there is no land grabbing or the neighbour doesn't extend the boundaries to your land. Hence, basic costs are for creating a boundary wall and a guard,"
A Home Away From Home
But don't start building holiday home in the air, though. Laws prohibit building of holiday homes on agricultural land. "A farm land is ideally a piece of land where you can do farming. It should not be confused with a holiday home. Different states have different laws for conversion of farm land into a holiday home, motel, hotel. There is a process laid down by each state which governs the change of land use." So, before you build a holiday home, study the laws of the state where you plan to buy the land. Narayan of Knight Frank warns that holiday homes are not great investment options. "A holiday home is mainly a lifestyle option. There's not much scope for investment in such a home because the liquidity is not great." But make no mistake, land is always a valuable investment. "Holding land may be sensible, given the increasing demand for food grains," says Narayan. "If you have already bought land, it is better to hold on to it as the purchase cost is not likely to be very high," .