Farmlands Becoming High-Interest Asset For HNIs Amid Tax, Diversification Benefits

Farmland in India is emerging as a quiet but powerful investment theme, drawing interest far beyond traditional farming communities. From high-net-worth individuals (HNIs) and non-resident Indians (NRIs) to corporates and institutional investors, a diverse set of buyers is increasingly eyeing agricultural land, driven by rising land values, food security concerns, agri-tech opportunities, and portfolio diversification strategies.

Why Are Different Buyer Groups Investing in Farmland

According to Anarock, farmland is increasingly becoming an alternative asset for HNIs, start-up founders, and senior professionals, typically in 1 to 5-acre lifestyle-plus-yield formats on the fringes of Bengaluru, Hyderabad, the Pune–Mumbai belt, Delhi National Capital Region (Delhi-NCR), Alibaug/Karjat, and growth corridors in Telangana and coastal Maharashtra.

Says Mayank Saksena, managing director and CEO, land services, Anarock Group: “Demand is driven by portfolio diversification, inflation, and food-security hedging, as well as improved weekend air travel and infrastructure upgrades, including new airports and expressways.”

Industry experts say a large number of wealthy and upper-middle-class families are also moving towards cities, such as Meerut, Alwar, and Greater Noida to purchase farmlands. These areas, which lie between 75 and 100 kilometers from Delhi, have become popular spots for people to build their weekend cottages and invest in permanent properties.

“The main factor driving this trend is affordable prices. The current market values for agricultural land in these locations remain below the values for properties which exist within or close to the national capital area. The market offers farmland of about 1,000 square yards for Rs 1 crore, which stands as an affordable price when compared to Delhi and its neighbouring areas,” says Nikhil Jain, managing director, Bhoomann Developers.

People usually buy agricultural land for their weekender houses, yet farmland investment has become India’s most profitable and dependable financial choice which brings together monetary benefits with environmental protection.

Tax Benefits

Farmland is also increasingly positioned as a hard asset that provides a blend of capital appreciation and long-term wealth preservation, besides giving tax benefits. Upside potential is anticipated in the areas of expansion of urban corridors and infrastructure.

“Agricultural income is exempt from central income tax, stamp duty on rural/agricultural parcels is often lower, and Section 54B lets individuals and Hindu Undivided Families (HUFs) roll qualifying capital gains into new agricultural land tax‑efficiently. Managed‑farmland platforms typically project 8–12 per cent annualised returns over the long term, but these are indicative, not guaranteed,” adds Saksena.

Tax exemption of agricultural income improves the post-tax returns. 

“It is attracting HNIs and family offices for diversification and urban professionals for farmhouse or legacy ownership. Some are also interested in a structured lease or contract farming platform to create a predictable cash flow by tying in with the growing domestic demand for food,” says Vivek Agarwal, co-founder and CTO, Square Yards.

Regulatory Changes Drive Investor Interest

Reforms are gradually influencing farmland markets in India. States have relaxed land leasing statutes to allow farmers to lease out land without giving up ownership to consolidate holdings.

“Revisions to Agriculture Produce Marketing Committee (APMC) rules and the e-NAM (National Agriculture Market) platform allow farmers or brokers to sell produce outside local mandis, resulting in improved price discovery. Contract farming laws provide legal avenues for farm manager agreements between farmers and companies. While these will encourage private investment in storage and supply chain, input reforms are aimed at improving efficiency. The extent of implementation varies,” adds Agarwal.

Farmland Buying Rules

Farmland buying rules are highly state‑specific. Any resident Indian can generally buy agricultural land (subject to land‑ceiling and zoning rules) in states, such as Rajasthan, Punjab, Tamil Nadu, and Telangana.

“In more restrictive states like Maharashtra, Gujarat, Haryana and Himachal Pradesh, buyers usually need recognised agriculturist status and, in some cases, local‑resident credentials or explicit government permission,” says Saksena.

Key Risks And Challenges For Buyers

Key risks in farmland include unclear titles, inheritance contests, pending litigation, land use restrictions which could halt or delay development plans, and limited financing options with most purchases being capital-intensive and illiquid in nature.

“Climate volatility, groundwater depletion, volatile crop prices, operational issues, tenant management, encroachments, and local conflicts are also challenges which buyers often face. Moreover, there is little transparency or price standardisation in farmland markets, which makes professional due diligence vital for managing risk as compared to usual urban real estate,” says Agarwal.

Moreover, several hill and North‑Eastern states tightly restrict sales to outsiders, particularly in tribal and scheduled areas.

“Under the Foreign Exchange Management Act (FEMA), NRIs, Overseas Citizen of India (OCIs) and foreign citizens are normally barred from purchasing agricultural land, plantation property, or farmhouses, and may hold such land only through inheritance, certain gifts from resident relatives, or infrequent RBI‑approved exceptions,” adds Saksena.