In simple terms, agro-realty refers to the clearly defined and demarcated land properties developed from large tracts of land for the purposes of selling to individuals who can then earn returns with minimal efforts. Hence, in agro-realty, the developers acquire a huge patch of land, divide it into sub-plots and then sell them to investors who are interested in earning high returns on this investment.
There are manifold benefits of agro-realty. The primary advantage is that the total cost of developing a property gets divided among the final owners of the farm land which is usually a fraction of what buying the entire property would otherwise cost. This cost of development includes sourcing water, laying roads, preparing the land, availing scientific farming techniques, and employing more staff on the farm for the upkeep and maintenance of vegetation. As a result, many of the agro-realty businesses encourage ultimate farm land owners to form societies amongst themselves so as to lower the marketing and production cost.
Agro-Realty Investments: Post Covid-19 Scenario
The whole concept of agro-realty, albeit recent in India, has been around in the western countries for quite a long time. In USA and UK, people make land investments in agro-realty to leverage the benefits of growing edible fruits and vegetables and to supplement their income. For some, it even turns into a recreational space over the weekend. It isn’t uncommon to build a house on the property as it already is equipped with all basic amenities such as water supply, electricity and navigable roads. Farm investment is a safe option for storing one’s funds as the return on investment is usually higher than normal and also lends safety to investors’ money.
Agro-realty in India has the potential to significantly transform the Indian agricultural landscape. As concerns for health and safety grow owing to the ongoing global pandemic, more people have now started preferring organic food. Companies use extensive amounts of chemicals to grow food which is becoming worrisome for many. As a result of this shift in consumer behaviour, many would now like to turn to organic farming, for which more lands will have to be bought.
The global market for organic food and beverages is poised to touch USD 327,600 million by 2022. Organic fruits and vegetables are together expected to constitute more than half of this market share. As the world population keeps growing at an unprecedented rate and global warming continues unabated, people are gaining consciousness about preserving earth and its limited resources. Organic farming has emerged as an efficacious way to conserve the environment, and with the coronavirus pandemic having upended the world, this change has picked up pace. Even well-read young adults with increasing disposable income are searching for ways to invest in the betterment of environment.
Major Benefits of Investing in Agro-Realty
Some of the major advantages that agro-realty offers are:
Lower Price of Land
Since the development cost of the land gets divided among all investors, the price of the furnished plot is much lower than what it would have cost to each owner singularly.
High Return on Investment
Investing in agro-realty involves making money with less efforts and nominal risk. The long-term return on investment in agro-realty is much higher compared to the returns earned on shares in the stock market or mutual funds.
Since the property is fully equipped with all the necessary amenities such as regular water supply and electricity, one could even make it into a weekend spot to go and spend time with their loved ones.
Unlike residential properties such as flats and apartments, agricultural lands do not depreciate with time. The quality of agricultural land does not deteriorate and so there are no maintenance costs towards that end involved. Along with saving on this cost, agricultural estate can also be put to multiple purposes in future, staying within the boundaries of law.
Overall, it can safely be presumed that real estate farming holds immense potential for those who have a love for organic farming and want to buy small farmlands for this purpose. As a general rule, agricultural land values derive support from the earnings made from the asset itself. Debt-to-asset ratios specifically remain low in the farming sector compared to other real estate classes.
(By Amith Kishan, Managing Director of Hebbevu)
Disclaimer: This is the personal view of the author. Readers are advised to consult their financial planner before making any investment.