5 Benefits of Buying Agricultural Land in India for Investment and Sustainability

Published on:
June 16, 2023

As the purchasing power of Indian investors continues to rise, they are seeking fresh avenues to capitalise on their investments. One such avenue is the acquisition of agricultural land. While some investors perceive such properties as valuable assets, others leverage the thriving market for organic fruits and vegetables to enhance their earnings.

According to numerous experts, investing in farms presents a secure alternative for safeguarding one's savings, as the returns on investment typically surpass those of other investment options while providing financial security. The market catering to such investors, commonly referred to as agro-realty, is experiencing substantial growth, particularly in the post-COVID-19 era.

In this article, we will explore the numerous benefits of buying agricultural land in India and why it has become an attractive option for investors.

But First, What Is Agricultural Land?

Agricultural land refers to a portion of land that is suitable for farming, where perennial crops are grown and used for perennial pastures. The Food and Agriculture Organization (FAO) defines arable land as including areas temporarily used for meadows, grazing, market or kitchen gardens, and temporarily left fallow. However, it does not include abandoned land resulting from shifting agriculture practices.

Farming land with permanent crops, such as coffee and rubber, is characterised by crops that occupy the land for extended periods and do not require replenishment after each yield. This category includes land with blooming vineyards, shrubs, and nut and fruit trees, but excludes land with trees specifically planted for wood or lumber.

Permanent pasture refers to land that has been utilised for fodder for five years or more, encompassing both natural and cultivated crops.

What’s The Difference Between Farming Lands And Agricultural Lands?

Farming is a subset of agriculture, sharing similarities and distinctions. While agriculture encompasses a broader range of topics, farming, and animal husbandry are the primary categories within it. Throughout history, agriculture employed the majority of the world's population until the industrial revolution.

The 20th century saw the green revolution, which brought accelerated progress to agriculture. However, agriculture is often dominated by monocropping or monoculture, resulting in reduced biodiversity.

On the other hand, farmland refers to the physical location where farming takes place. Farming itself involves the cultivation of land, which can be done on a small scale for personal consumption or on a larger scale, such as intensive mechanised farming.

There are various types of farming, including collective farming, industrial farming, intensive farming, organic farming, and protected culture farming. Farming practices encompass activities such as trimming, transplanting, tilling, selective harvesting, crop diversification, and other similar techniques.

5 Benefits of Buying Agricultural Land in India

  1. Potential for High Returns + Resale Value

Investing in agricultural land offers the potential for significant returns on investment. As the demand for food continues to rise, the value of agricultural land tends to appreciate over time. Furthermore, with advancements in farming techniques and technology, there is an opportunity to enhance productivity and yield, thereby increasing the income generated from the land.

Agricultural land is a finite resource, and its availability is limited. As the population grows and urbanization expands, the conversion of agricultural land for non-agricultural purposes reduces the supply further. This scarcity drives up the demand for agricultural land, thereby increasing its resale value.

  1. Diversification of Investment Portfolio

Agricultural land provides an excellent opportunity to diversify an investment portfolio. By adding this asset class to your investment mix, you reduce the risk associated with having a portfolio concentrated solely in traditional investment options like stocks or real estate. Agricultural land acts as a hedge against market volatility, providing stability and long-term growth potential as one of the primary benefits of buying agricultural land in India.

  1. Tangible Asset with Multiple Uses

Unlike other investment options that may exist only on paper, agricultural land is a tangible asset that can be put to various uses. It can be utilized for farming, cultivating organic produce, setting up agribusinesses, or even exploring eco-tourism possibilities. This versatility provides investors with the flexibility to adapt to changing market dynamics and explore different avenues for generating income.

Agricultural land often holds potential for non-agricultural uses, such as industrial development, commercial projects, and real estate ventures. The prospect of converting agricultural land for these purposes makes it attractive to investors and developers, driving up its resale value.

  1. Tax Benefits and Government Support

The Indian government has recognized the importance of agriculture and provides various tax benefits and incentives for agricultural landowners. These include exemptions on income generated from agricultural activities, subsidies for irrigation and farming equipment, and favourable financing options for agricultural projects. Such support fosters a favourable environment for agricultural investments, providing additional financial advantages for investors.

  1. Positive Social Impact

Investing in agricultural land not only offers financial benefits but also contributes to the social well-being of rural communities. It promotes employment opportunities in the agricultural sector, stimulates economic growth in rural areas, and helps uplift the standard of living for farmers and their families. By investing in agricultural land, you play a role in sustainable development and support the backbone of India's economy.

A Final Word On The Benefits of Buying Agricultural Land in India

The benefits of buying agricultural land in India presents a range of opportunities for investors. From the potential for high returns and portfolio diversification to tangible asset ownership and government support, the benefits are significant. Moreover, investing in agricultural land aligns with sustainable development goals, making it a socially responsible investment choice.

Did You Know About The PM KISAN Scheme?

The PM KISAN Scheme is a government initiative aimed at providing financial assistance to farmers who own land. Through direct benefit transfer, eligible farming families receive an annual monetary reward of Rs. 6000 directly into their bank accounts. The scheme excludes individuals belonging to certain higher economic categories.

Launched by the Hon'ble Prime Minister on February 24th, 2019, this program is one of the world's largest direct benefit transfer schemes, reaching millions of farmers without any intermediaries. The registration and verification process ensures transparency, allowing the Government of India to swiftly disburse benefits upon the Prime Minister's command.

Under the PM Kisan Samman Nidhi plan, eligible farmers receive benefits every four months. This scheme marks a significant shift in the government's approach to supporting farmers and showcases effective governance and the utilization of digital technology to directly reach residents.

Leveraging the digital infrastructure of PM KISAN, the government is also working on developing an agricultural digital ecosystem called Agri stack. This digital system uses the PM KISAN data as its foundation to create a federated farmers' database that will be managed by the states. Hence, the benefits of buying agricultural land in India stand as the undefeated investment option.

Benefits of Buying Agricultural Land in India FAQs

1. Is buying agricultural land a good investment in India?

As previously stated, agricultural land in India experiences an annual appreciation rate of approximately 10% to 12%. This rate surpasses the appreciation rates observed in other categories of property, including residential and commercial real estate.

2. Is buying agricultural land a good investment in India?

Agricultural land in India experiences an annual appreciation rate of approximately 10% to 12%. This rate surpasses the appreciation rates observed in other property categories, including residential and commercial properties.

3. Can we save tax by buying agricultural land?

You can avail of the benefit provided by section 54B to claim an exemption for capital gains that arise from the sale of agricultural land, whether it is a long-term or short-term capital asset.

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Build the house of your dreams surrounded by lush greenery while easily expanding your investment capital.Farmland investing is an excellent opportunity to invest in something tangible that will provide a consistent return for you and your future generations.

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