Farmland can be good investment, but beware!

Owning farmland has advantages, one being that income earned from and gains made from selling the land are exempt from taxation.

Published: 07th May 2018 05:48 AM  |   Last Updated: 07th May 2018 05:48 AM   |  A+A-

Image used for representational purpose only. (File photo | EPS)

Express News Service

HYDERABAD: Many dream of owning a piece of farmland, where they can not only indulge their passion for farming, but also use it as a weekend getaway. But one should exercise a lot of caution before buying farmland, as the process entails several challenges.

Owning farmland has advantages, one being that income earned from and gains made from selling the land are exempt from taxation. But rules regarding agricultural land vary from state to state. In some states, including Telangana, anyone can buy agricultural land irrespective of whether or not they are farmers, but in states such as Karnataka, only registered farmers or those from farming families can buy such land. Therefore, before buying farmland, one should know the relevant rules in the state. Also, there is a ceiling on the amount of farmland an individual can own, and it varies from state to state.

Prospective buyers should be clear about how much returns they expect, whether they will do farming by themselves or lease the land to someone, and whether they want just a farm or also a farmhouse, said Ram Reddy Gummi, president, Confederation of Real Estate Developers’ Associations of India, Telangana.
“One should know that farming is not such an easy activity, as publicised by some developers and middlemen. Also, rules and legal procedures regarding agricultural land change from state to state. Therefore, utmost care needs to be taken while investing,” Gummi said.

Investors should not just exercise due diligence while buying farmland, but also have a clear plan for how they will manage the land once they own it. In most cases, returns on farmland may not be as attractive as they are publicised.

“Buying agricultural land can be a good investment for high net worth individuals and for those with surplus income,” said senior financial adviser Subba Rao Anupindi. But he cautioned that buying farmland was fraught with difficulties.

One should ensure that the land has a clear title, as farmland in most parts of the country is mired in disputes. One should visit the land and enquire with the local revenue, registration and local body authorities to find out all details about the land and the antecedents of the seller, he said

“For salaried individuals or self-employed professionals living in cities, going through all this process will be definitely time-consuming and tiresome. So, before buying farmland, investors should keep in mind all these practical aspects,” said Anupindi.

Before buying farmland

  • Be clear about what to expect from owning farmland

  • Ensure that the land to be bought has a clear title

  • Check the antecedents of the seller

  • Enquire with local body authority and revenue and registration departments about the title of the land

  • Encumbrance certificate should be verified to know about past owners and registration of the land

  • Rules in the state with regard to farmland should be known


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