Benefits of investing in farmlands

With their purchasing power increasing, Indian investors are looking for new ways to profit from their investments. Investing in agricultural land is one such method. While some investors keep farmlands as assets, others supplement their income by tapping into the growing market for organic fruits and vegetables.

Here are some of the benefits you can have by choosing to invest in a farmland plot:

1. High Level of Capital Security and A Low Level of Risk – 

An investment in farmland is backed by a rock-solid asset which is unlikely to depreciate. Also, past data shows that farmland has exhibited strong capital protection characteristics over long periods of time. Well managed farmland is a fully renewable resource which remains productive till its next sale. Thus, a farm plot is a dependable, profit-generating asset that has withstood the test of time, making it a fruitful option in creating long-term wealth.

2. Farmlands are an Effective Inflation Counter –

While gold is a hedge against inflation, it is not resistant to other, unforeseen macroeconomic shifts. But, some investments are. Unlike gold, farmland produces cash income as investors hold it in the form of crops or rent: better seasons mean better returns for investors, even when the market is fluctuating. Farmlands typically escape such volatility and continue to appreciate. Historically as well, farmland values generally increase faster than inflation, making farmland an effective inflation counter tool and capital preservation medium. This may particularly attract investors who are concerned about government policies regarding inflation.

3.  Farmlands are a Stable Income-producing Asset –

In contrast to other mainstream options such as commodity & precious metals, farmland also provides a regular income to the investor, making it a useful replacement for lost ‘risk-free’ income on cash deposits and bonds due to low-interest rates. Although not necessarily the highest return available in the real estate sector, this income is being earned on an asset that is unlikely to reduce in value.

4. Farmland Investment Delivers High Total Returns –

Farmland investment offers both operating and capital returns in the form of a combination of rental income and value appreciation of the asset. As per the past data, total returns from farmland have constantly outpaced popular assets such as stocks, bonds, real estate, etc. You will undoubtedly receive significant rewards in the long run as the value appreciates over time.  As an added bonus, agriculture-related income is exempt from income taxes.

5. Farmland is an Attractive Portfolio Diversification Tool –

Farmland returns have no direct connection with traditional asset classes such as stocks and bonds resulting in least market risks. Farmland is also a terrific addition to any investment portfolio because it has shown to be inflation resistant and is a large asset that will hold its value. Farmland investing can be expensive at first, but if you aren’t afraid of the prices or other potential barriers, it can be a very valuable investment. These characteristics make farmland an attractive diversification tool that can help reduce the impact of market volatility. 

6. Owning a farmland helps in sustainable independent living

The foremost reason to procure and invest in farm lands/plots is to develop an idea of self sufficiency without having to depend on any external providers as well as improving the quality of food at a reasonable cost. If you plan on cultivating your own produce, not only will you be living sustainably but also be able to make money off the extra produce. All that’s left to do is to choose what you want to grow.

Investors who are considering buying agricultural property in rural areas around the city, may find this opportunity very lucrative as now a number of state governments are opening up farm lands for housing development and industrial purposes. Recently, the state government of Gujarat announced that real estate developers will be allowed to purchase agricultural land for affordable housing under the Gujarat Tenancy Act.

Similarly, in Karnataka, the state government passed amendments to the land reforms act that liberalised farmland ownership and extended the facility to buy agricultural land by a non-agriculturist. This could just be a start and very soon, other states may open up farm lands for real estate construction, resulting in more supply and maybe, cheaper homes. However, before jumping the gun with investing, it is advisable for one to 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. It is advisable to have a plan that can be relied upon, before choosing to invest in farmlands.

Limited supply, never-ending demand makes land more valuable.
Land appreciates more quickly than any other type of property.
No gap between purchase and possession.
No maintenance cost.

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