THE BEST SUSTAINABLE BUY - AGRICULTURE LAND
By Ruma Dubey
| Do you know where the next boom is headed and a boom which will never ever taper off? The food industry. Not processed food but the primary source of all food – agriculture. And China, as usual is buying up as much agricultural land as it can and its target is Australia. With a cool off in commodities like copper, iron ore and coal, the main fray of Australia, the Chinese having made substantial investment in these sectors in Australia are now looking at greener pastures. A report put out by KPMG suggests that Chinese companies are showing an increasing appetite for investing in Australia’s food sector, basically “from gate to plate”. The logic being that food demand will only go up in China and it can make food supply secure and also gain expertise from Australia’s companies and farmers. Banks are eager to fund these Chinese acquisitions as mining and energy projects are finding it tough to get financing for their projects. Food is one sector which will always have a linear if not vertical growth; there being no chance of demand falling. This makes perfect business sense too as on one hand while metal prices are cooling off, food prices are spiking up with weather becoming more and more unpredictable thereby increasing chances of shortfall. Moreover, the United Nations has stated in one of its reports that production of food grains will need to increase by 70% by 2050 to meet the increasing demand. And that means only one thing- food prices over the years will only continue to rise. Well, if you have the money to spare and are itching to deploy some of it in real estate, forget luxury homes or even affordable homes, the best bet is undoubtedly agriculture land. For those with a horizon of 10 years, surely having land which tills rice, wheat or grains and pulses is the best bet. With growing population and adverse weather conditions, it is food which will become dearer. Be it coffee, wheat, rubber, grains and pulses, the need will become to produce more as shortages are bound to crop up. Macquarie has in fact put out a report stating that it is bullish on agriculture commodities but it is putting maximum bets on corn as a combination of strong feed demand growth in Asia and record US ethanol production is outstripping the world`s current corn production capacity. And it is not just Macquarie, even Barclays has put out a report stating that crude oil and grains will be the top commodity performers this year as investors bet on supply disruptions. Monsoon is currently 11% below average and Asian rice prices are forecast to rise by as much as 10% in the coming months as supplies tighten. Not just in India, but a more severe drought has hit USA, though inflation there is expected to stay stable, price of some agri commodities are expected to surge. Agflation, the new word of the 21st century, denoting inflation led by rises in agricultural commodity prices, seems to be here to stay. Just as we have accepted the unseasonal rains, extreme heat and cold weathers as part of this new world, we also have to accept that weather disruptions are here to stay and will affect agricultural production. Rains and floods, drought and snow are no longer one-off events. They have become routine. Hence under the current scenario, with growing consumption, every bit of logic points out to food prices only gaining. Makes sense to buy agriculture land for the future?
How to buy agriculture land? As per law, unless you are a farmer, in majority of the Indian states, you are not allowed to buy agriculture land. So you can buy this land only if your father or grandfather owned land and was a farmer or else you need to show that you already own some farm land. Most of us urbanites are not farmers, even remotely, so you then need to apply for conversion of land to non-agriculture purposes. In Maharashtra buying agriculture land through a legal process is virtually impossible as one need’s to be a farmer, or needs to show proof of his relatives being a farmer or show proof of being an agriculture worker on a farm. So there are many, who use a loophole in the system, tat too at the behest of their CAs and lawyers, buying land in states like Tamil Nadu, Punjab, Harayana, Rajasthan or Madhya Pradesh. They buy around 16 guntas which is 0.40 acre in these states, get the patta or the 7/12 issued in their name, making sure that he/she gets a valid translation in English to reduce registration time when buying land in Maharashtra. This patta shows proof that he/she owns agri land and this in turn will enables them to purchase land in Maharashtra legally. And getting ownership does not mean all restrictions go - there are restrictions on the size of farmhouse and sheds that you can construct on the land. Remember, the process is pretty tedious and you might have to go against Annaji and grease some palms to get the land. (Would you want to really want to something like this, just for a few rupees more?) And before buying ensure that the land is freehold and free from any encumbrances and litigations. Once you buy farm land, maybe you can get contract labourers to start tilling the land!
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