Here is a look at the legalities of farmland ownership
Owing a piece of land is often seen as one of the best investments possible. The valuation of the land continues to grow and there is always a possibility of infrastructural growth happening in and around that particular area. If not for that, one can surely make the most of the land by using it as farmland and generating plentiful yield all year round if done right. That being said, owning farmland is quite different from buying property or buying just a normal piece of land. Several laws in place need to be checked for and consulted with before making the purchase.
The nature of farmlands is such that one can cultivate crops and use them for generating business. Hence this type of land often targets investors who know agricultural land or large businesses whose backbone relies on agricultural produce. To make sure these lands are protected, there are several laws in place that one must adhere to before investing in farmlands.
“The eligibility criteria for purchasing agricultural land in India vary across states, subject to specific laws and regulations. For instance, Tamil Nadu has no restrictions, allowing anyone to buy agricultural land. The state allows a person to purchase a minimum of 59.95 acres of agricultural land. In addition, if there has been no agricultural activity on the land in the last 10 years, it can be converted into non-agricultural land. However, states like Karnataka, Maharashtra, and Gujarat prescribe certain limitations. Karnataka restricts land purchase to state-based agriculturalists with an income cap of Rs 25 lakh from non-agricultural sources. In the state of Maharashtra, and Gujarat prescribe certain limitations. Karnataka restricts land purchase to state-based agriculturalists with an income cap of Rs 25 lakh from non-agricultural sources. In the state of Maharashtra, only agriculturalists are allowed to purchase land with a ceiling of 54 acres. Non-agriculturalists need to obtain permission from the district collector to purchase agricultural land. Similarly, in the state of Odisha, permission must be obtained from a sub-collector/revenue office to buy land belonging to an SC/ST individual by a person from another caste. Non-native buyers in the state of Himachal Pradesh u/s 118 of HP Tenancy and Land Reforms Act, 1972.
Permissions play a vital role in determining the sale of farmland to the right investor. Different states have laws for those who can or will be allowed to purchase land in their state. Unlike buying land normally where an investor can simply purchase land by going through a series of legal steps, in the case of farmlands, the state decides who it can allot the land based on various factors. “In Karnataka, Tamil Nadu, Andhra Pradesh and Rajasthan there is no permission required to acquire a farmland however , the one major condition is that he/she needs to be a resident citizen of India. In certain other states like Maharashtra only an agriculturist (either owns an agriculture land anywhere in India directly or through succession or is in the cultivation business) can buy the agriculture land. In some states you need to be domiciled to buy the agriculture lands, so the laws around owning agricultural lands differ from state to state. Where the buying of agricultural land is restricted, one needs to obtain permission from the local authorities mentioning the reason to buy”
These laws are in place and applicable to Indian residents who wish to buy farmland. For NRIs there is a slightly different set of rules. In most cases, NRIs cannot directly acquire farmland in India and that can only be passed through ancestral property. “Non-resident Indians (NRIs), Persons of India Origin (PIOs), Overseas Citizens of India (OCIs), and foreign citizens face restrictions outlined by the Foreign Exchange Management Regulations. These individuals cannot acquire agricultural land but can Inherit it from their ancestors. However, such land cannot be sold or transferred to ineligible parties and must be used for agricultural purposes”.
Once all the major legalities taken care of and everything is in check, one needs to know the categories of farmlands. As simple as it may sound, farmlands aren’t restricted to just one type. There are several categories that farmlands are classified into and they all serve different purposes as per the need and requirement of the investor planning to buy it.
Types of farmlands as follows:
Wedlands: Typically used for growing paddy and other water-intensive crops, these lands have high moisture content and are often located in regions with substantial rainfall.
Drylands: Used for cultivating crops that require less water, such as pulses and millets. These lands are more suited for regions with lower rainfall.
Plantation lands: Dedicated to growing cash crops like tea, coffee, rubber, and spices, often found in hilly or high rainfall areas.
Horticultural lands: Used for cultivating fruits, vegetables, and flowers, requiring specific soil and climate conditions.
Pastoral lands: Primarily used for grazing livestock and maintaining fodder crops.
Fallow lands: Land left uncultivated for a period to restore its fertility.
Forest lands or eco sensitive lands: The lands which fall under the gazette notification of Eco-logical parks of India where Agricultural activities are restricted.
Once the buyer finalises the farmland to buy, the next step is to adhere to the legal aspects after checking for state laws for ownership. The legal step forward is to ensure that all the documents and the purchase of the land go smoothly.
TITLE VERIFICATION AND ENCUMBRANCE CERTIFICATES:
The cornerstone of farmland ownership is verifying the title. A clear title ensures that the property is free from legal disputes and encumbrances, such as liens or mortgages. It’s recommended to track the title back at least 40 years to confirm a clean ownership history. Encumbrance Certificates (EC) are equally important as they disclose any existing liabilities on the property, including mortgages, leases, or restrictive covenants. This document is essential for confirming the seller’s legitimacy and ensuring no legal obstacles in transferring the property.
Property Tax Receipts and Land Measurement:
Before purchasing farmland, it’s critical to review previous property tax receipts and related bills to avoid future taxation issues. Collecting all past documents, invoices, and tax receipts ensures there are no outstanding dues on the property. A land measurement certificate, obtained from a surveyor, verifies the exact area and boundaries of the agricultural plot as stated in the title deed, ensuring the accuracy and legitimacy of the land purchase.
Essential Documents for Due Diligence:
Fencing, Access Paths, and Demarcation:
Proper fencing and clear access paths are vital for securing ownership rights and protecting the property from encroachment. Investors should ensure that farmlands have well-defined boundaries and demarcations to avoid disputes and unauthorised occupation.
Avoiding Real Estate Scams:
The Indian real estate sector, including agricultural land, is prone to scams and frauds. Common warning signs include too-good-to-be-true offers, unclear ownership, and pressure to make quick decisions. Buyers should exercise caution, conduct thorough due diligence, and seek professional advice to avoid falling victim to real estate fraud.
In conclusion, before buying a farmland it is best to get informed about the local laws in place along with the state laws. Further on as things seem favourable, adhere to the laws set in place for farmlands or seek legal assistance to guide you through the process of acquiring a farmland. Farmlands despite being simple are categorised differently and one must be certain of the type of farmland they wish to invest in before making the purchase.
