Urbanisation can boost value, but enter with decade-long horizon

Zoning law changes, encroachment pose risks; adhere to state-specific rules

- KARTHIK JEROME

A leading actor's daughter is facing legal trouble over her purchase of agricultural land outside Mumbai, according to media reports. The plot was originally earmarked for agricultural use and could not be transferred without obtaining the necessary permissions and completing the required paperwork, which was not done. Investors planning to invest in agricultural land outside a major city to benefit from its expansion need to exercise caution.

City's growth drives prices up Buying land on the city outskirts with a long horizon can be rewarding. "Urbanisation creates demand and leads to appreciation in the value of such land," says S G Raja Sekharan, wealth management expert and author of the book, How to get rich and retire early, which deals with investing in agricultural land.

Investing in agricultural land also diversifies an investor's portfolio. "Investors can enjoy the benefits of various incentives and subsidies offered by the government. They can also enjoy tax savings under the rules applicable to agricultural income," says Santhosh Kumar, vice chairman, Anarock Group.

Illiquid asset Investing in agricultural land comes with its share of risks. "There are strict limitations on how agricultural land can be used," says Kumar.

It is also among the most illiquid asset classes. "Selling and exiting quickly may prove difficult," he says.

Zoning law changes can impact value. If conversion to non-agricultural use is restricted, the prospects for appreciation decline. Encroachment is another concern.