Are you Eligible to buy Agriculture Land
Besides legal hurdles, there could be practical issues such as a blocked approach, or sharing arrangements for water or power.
Buying farmland is a dream come true for investors looking to put together a retirement kitty.
Bought at a throwaway price, the idea is to eventually convert the property into a residential plot and sell it for a huge gain.
But the dream could turn into a nightmare if the land you bought was actually leased out Government land, as in the case of Bollywood actor Rani Mukherjee. She bought a plot in Shirdi, but it was seized by the Government and is now at the centre of prolonged legal proceedings. The reality is that farmland purchases are risky, so if you are keen on it, do your homework well.
Limitations on buying
First, determine whether you are eligible to buy agricultural land. Non-resident Indians, persons of Indian origin and overseas citizens of India cannot purchase agricultural land, plantation property or farm houses. They can however, inherit agricultural land, says Aarthi Lakshminarayan, an advocate with Dua Associates.
There are also restrictions on agricultural land purchases by resident Indians to safeguard cultivable land.
The laws are not uniform throughout the country, agriculture being a state subject. In Himachal Pradesh, for example, only an agriculturist from the State is allowed to buy farm land. Karnataka and Gujarat also restrict ownership of agriculture land to State-based agriculturists. But in Maharashtra, owning an agricultural plot anywhere in the country entitles you to buy land, says Shyam Sundar, a Chennai-based advocate.
There are also ceilings on how much land you can own. In Kerala, there is a strict ceiling on land ownership across categories of holdings.
In Uttar Pradesh, on the other hand, there is only a limit of 12.5 acres in the case of agricultural land holdings. So, be sure to check the ceiling in the State where your prospective purchase is located.
Restrictions on conversion
Most of the huge gains from agricultural land purchases occur when the land is reclassified for some other purpose. Land identified for agriculture is further classified into wet land (cultivable land with irrigation sources) and dry land. In many states, Government policy only allows conversion of dry land, which is not suitable for cultivation, for non-agricultural purposes. Usually, conversion of arable wet land is very difficult.
Typically, the district collector is the authority for reclassification of land. But the rules for conversion vary from state to state and may involve long delays.
For instance, in Tamil Nadu, dry land can be converted into a non-agricultural land if no agricultural activity has taken place on it for the last 10 years. So, if you hope to benefit from reclassification of your land purchase, first check how feasible it might be.
After you zero in on a property to buy, do legal due diligence. You must check if the property can be transferred.
This is important because the land may have been only leased and hence not saleable. Also, land granted by the Government under some provision requires permissions for sale. For example, land given to freedom fighters or ex-servicemen can only be transferred with the collector’s permission.
You need to check if the seller has the right to transfer the property. For instance, if the owners are minors, prior permission of a court is needed before transfer to third parties.
Any transfer by a guardian without court permission can be challenged by the minor within three years of him/her attaining majority, cautions Aarthi.
A common issue you may face is that the death certificates for a deceased land owner and legal heir certificates are not available.
It is possible that one or more legal heirs may deliberately conceal other rightful heirs when selling, points out Sundar. This may lead to a legal dispute when the other inheritors lay their claim.
Even after legal hurdles are cleared, there could be practical issues related to the land, such as a blocked approach. For instance, you may have to go through the neighbour’s land to reach your selected property and there may be disputes over access.
Similarly, there may have been access granted to others to go through the land you intend to buy. You must also check other rights to share and use, known as easements.
These include sharing arrangements for water, allocation to run power line or sewers.
For example, water channels from nearby lakes may pass through the land you intend to buy and other farmers may have easement rights over these water channels. Make a checklist of such arrangements and take stock of any pending disputes.