Farmland Investment

Market Size

Globally, farmland is a $9 trillion market. The world has 15.749 million km (2) of arable land. India has the most arable land worldwide (arable land is the land plowed or tilled regularly, under crop rotation). India and the US account for 22 percent of the world’s arable land. 

Historically, India is an agrarian economy. Our association with the land is more mentally, culturally, and economically. They say, if the farmer is rich, then so is the nation. Our forefathers have always emphasized the importance of investing in the land. India has its roots deeply embedded in the passion for the land.

As long as the investment is concerned, people still have an affinity in India towards the land. There are many reasons for this. 

  1. Money grows when invested in land for the long term.
  2. Farm income is tax-free
  3. Lack of demand-supply equilibrium leading to inflated commodity prices. 

Why is diversification of investment essential?

Farmland investment offers lucrative profits compared to the other market instruments like mutual funds, direct equity, ULIP (Unit Linked Insurance Plans), or Public Provident Fund (PPFs).

Every individual wants to invest in those investment instruments that are the best and gives maximum return and minimum risk. The financial advisors always reiterate the importance of diversification and distribute the investment into different investment options to reduce the risk associated with one investment option from the others.

In times of economic recession or unforeseen market fluctuations, farmland investment proves to be long-term wealth as the farmland investment cannot depreciate with time, unlike flats and urban land investments.

Why is farmland investment a better option now?

The world is amidst a global pandemic. India is underway an economic and a health emergency. For the population of 1.39 billion, the country needs farms to feed.

Rising prices and demand for food and food products will further create more requirements for farmland production. Farmland investment proves to be a much promising business proposition.

People aspiring for meaningful investment options that contribute to social goodwill find inspiration to invest in farmland. The investment benefits the environment and also helps the farmers to do farming. It enables the farmers to optimize the production.

Rise of the Middle Class

Another theory to look at is interestingly the rise of the middle class. The rise of the global middle class is a key megatrend sweeping the planet (Global Trends 2030, NIC). Hence, there will be more purchasing power in the hands of the potential investor. If trends continue, the middle class in low and middle-income countries will grow from 5% in 2005 to 25% in 2030.

It also leads to a trend that the rising income group will need more investment options as their purchasing propensity increases.

Going back to the land

Farmland investment is an alternative tool for the distribution of income. The modern urban middle class is earning more and spending more, and looking to invest more.

Putting cash on the table for farmers is a great way to redistribute the income. Investing in farmland directs the money back to the land that is the backbone of our country. Refocusing on farmland thereby puts the focus back on optimizing farmland produce. It is the right approach for a more balanced and distributed funds allocation both individually and at a macro level.

Personal Aspirations

About 60% of rural Indian households make their living from agriculture. For individuals in the urban area who aspire to shift to the organic way of living, agro realty is a great start. Owning farmland will eventually contribute to growing your yields and giving your future generations hope to survive in a chemically made-up world.

This concept has been there for a long time in the USA and UK. People generally find this a stable way of investing and growing their organic fruits and vegetables while substituting their income. Since the land has basic amenities like food, water, and electricity, some end up making their own weekend family getaway home on the farm to experience nature and simple living.

Thinking about the farmers

While India has the most arable land, farmers are still struggling with outdated equipment, improper infrastructure, lack of access to the national market. Leading to limited profits and not able to apply best practices and methods of farming. By investing more in the farmlands, we can solve the problem. It will also bring about transformation in the livelihood of farmers. For farmers to stay in business, more investment in farmland is required.

To summarize, 10 reasons for farmland investment

Top 10 reasons to invest in farmland

  1. Distribution of wealth
  2. Diversification of investment
  3. Tax Free Income
  4. Safest investment option
  5. Improving the produce quality and quantity
  6. Accessible and easy farmland investment leads to growth of technology innovations in agri-fintech industry
  7. Social impact
  8. Capital Gains
  9. Maximum Return on Investment
  10. Livelihood to farmers

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