How to buy agricultural land in Tamil Nadu?

Real estate investment is considered one of the most secure investments in India. Owning agricultural land is another sought-after property option for buyers, as it allows one to diversify their real estate portfolio while enjoying tax benefits. The income and capital gains from agricultural land are exempt from tax, allowing the buyer to earn high returns. When buying agricultural land, it is crucial to be aware of the state-specific regulations. For example, the Tamil Nadu Land Reforms (Fixation of Ceiling on Land) Act, 1961, lays down several rules and regulations for investments in agricultural land. In this article, we will delve into the specific rules governing agricultural land purchase in Tamil Nadu.

Why do people invest in agricultural land?

Income generation: In India, investments in agricultural land are emerging as an attractive avenue for earning passive income. Farmland investments are primarily done for the purpose of farming for self-use, especially with the growing popularity of organic farming. Moreover, income generated from agricultural activities is exempt from income tax in India under specific conditions.

Agricultural land appeals to many investors, including entrepreneurs and high-net-worth individuals. Investing in a land parcel through a lease agreement, crop-sharing, or agribusinesses (e.g., dairy and poultry) is a lucrative option for buyers. Constructing a farmhouse or home on agricultural land to earn rental income is another popular concept. 

Affordability and long-term appreciation: Land prices tend to appreciate over time. Buying agricultural land in a strategic location with access to water and good-quality soil, easy road access, etc., is likely to fetch higher returns for the investor. Moreover, buying agricultural plots is much more affordable than buying residential or commercial plots.  

Who can buy agricultural land in Tamil Nadu?

In India, state-level regulations broadly govern transactions involving agricultural land. Typically, the state government imposes restrictions on who can purchase agricultural land to prevent misuse. 

In Tamil Nadu, any resident can purchase agricultural land if they meet the specified income criteria (i.e., income from agriculture). Hence, farmers or agriculturists have the right to purchase agricultural land for the purpose of carrying out agricultural activities. Farmers and those eligible to buy agricultural land must furnish valid agricultural income proof to complete the property transaction. 

Business entities, such as companies, trusts, and partnership firms, can buy agricultural land solely for farming activities, in compliance with state laws.

Non-farmers, non-resident Indians (NRIs), Persons of Indian Origin (PIOs), and foreign nationals cannot buy agricultural land in Tamil Nadu. If they want to purchase agricultural land, they must approach the state government for special permission. When engaging in property transactions in India, NRIs and foreign nationals are also bound by the regulations under the Foreign Exchange Management Act of 1999, overseen by the Reserve Bank of India (RBI)

Types of agricultural land in Tamil Nadu

Agricultural land in Tamil Nadu is primarily classified based on its characteristics and use. 

Based on the availability of water, agricultural land is classified as:

• Wetland or Nanjai: This refers to fertile land with a continuous source of irrigation, such as rivers, lakes, or canals, and is typically located close to such water bodies. This type of land is mostly used for paddy cultivation and intensive agriculture. Conversions of such lands may be restricted. 
• Dryland or Punjai: This refers to land that depends on rain-fed agriculture or minimal irrigation. Usually, such lands are less fertile and need less water, which makes them ideal for growing certain crops. They are also used for residential or commercial purposes. Conversions of such lands are easier than Nanjai lands. 

Based on the characteristics and vegetation, agricultural land in Tamil Nadu may also be classified into the following:

• Garden: Used for cultivating fruits, flowers, vegetables, etc. and plantation crops like tea, coffee and other cash crops. This type of land is characterised by its rich soil and ideal climate, supporting high-value horticulture. 
• Forest lands: This type of land includes natural reserves and is protected under the Forest Department. Conversion of such lands for agricultural or private purposes is not allowed. 

For administrative purposes, agricultural land in Tamil Nadu is also classified into the following categories: 

Poramboke Land: This type of land is meant for public use and comprises grazing fields, water bodies and other common areas. The sale and purchase of Poramboke Land for private purposes is not allowed, as it is owned by the government.

Steps to buy agricultural land in Tamil Nadu

#1. Find out the eligibility 

Before investing in agricultural land, buyers should check whether they are eligible to purchase. In Tamil Nadu, farmers or agriculturists are allowed to purchase agricultural land, while non-farmers face restrictions and approvals may have to be sought.

#2. Check land records 

As an initial step, the buyer must check the land type – whether it is a wetland (Nanjai) or dryland (Punjai). Typically, drylands are easier to convert for non-agricultural purposes. 

Accurate land classification is essential for various purposes, including property valuation and tax assessment. The property rates differ based on the type of land. With the Tamil Nadu government’s digitisation efforts, one can access land records online through the official Tamil Nadu Land Records portal at https://eservices.tn.gov.in/eservicesnew. 

Moreover, buyers must ensure that the measured area of the plot they plan to purchase matches the area shown on the title certificate. This is necessary to avoid any legal hassles. The total area of the land and boundaries are measured by a surveyor.

#3. Obtain relevant land documents

Buyers must gather various legal documents to confirm ownership and land classification. 

• Patta Chitta: Patta Chitta refers to a land revenue document issued by the revenue department, which is a complete land ownership record. The document mentions the ownership details and land information. Tamil Nadu’s Land Records e-Services portal allows citizens to apply for Patta Chitta online.  
• Encumbrance Certificate: This is a legal document that certifies the land is free from legal disputes, mortgages or claims by third parties. It is important for property buyers to obtain these documents to ensure the land has a clear title. 
• Release certificate: For any land that had been previously mortgaged, a release certificate should be obtained. The document certifies that the dues have been cleared, allowing a smooth sale process. 
• Title Deed: This is a legal document that proves the seller’s rightful ownership of the land. Buyers must verify the title deed with the local authorities.
• Mother Deed: The mother deed is another crucial property document giving a complete history of land ownership. 
• Property tax receipts: Buyers can request property tax receipts from sellers to confirm that all dues have been cleared and that the new buyer has no liabilities.
• Approved layout plan: If the land plot is part of a layout, buyers need to ensure approvals are in place from relevant authorities, such as the Directorate of Town and Country Planning (DTCP). One should invest in unapproved layouts to avoid legal hassles.
• No Objection Certificate (NOC): NOC letters are issued by relevant authorities stating they have no objections to the property transaction. This may be necessary if the land one is considering is governed by special regulations.
• Power of attorney: This document is vital if the property transaction is executed by someone else on behalf of the seller. 

Buyers must review all the documents carefully and can approach a legal professional if required. 

#4. Complete the stamp duty and registration process

The next step is the registration process at the sub-registrar’s office. After finalising the sale price, property buyers must approach the local municipal department to complete the registration of the sale deed. The relevant stamp duty must be paid. For agricultural land in Tamil Nadu, buyers must pay a stamp duty of 7% of the property’s market value, and a registration fee of 4% of the property’s value is applicable. Women property buyers receive a rebate on the registration fee and they have to pay 3% of the property value. 

#5. Apply for the mutation of land records

After property registration is completed, property buyers must also ensure that the new owner’s details are updated in the municipal records. Hence, they must complete the mutation of land records as per the procedures of the local authority. This enables the owners to pay their property taxes and prevent any legal problems.

Important regulations to know when buying agricultural land 

Land ceiling 

Various state governments impose a land ceiling or limit on the land area purchased by citizens.

The Tamil Nadu government specifies a maximum limit of 15 standard acres per individual. This is meant to curb the unfair concentration of land in the hands of a limited number of people. Purchasing land beyond the specified limit requires the buyer to go through various government processes and comply with norms and policies.

Land use history

Land buyers are required to comply with various local norms, zoning regulations and approvals from relevant authorities. These laws are based on the location and intended land use. 

Land conversion

In Tamil Nadu, the conversion of agricultural land to non-agricultural purposes is governed by the Tamil Nadu Change of Land Use Rules, 2017. Buyers must be aware of the legal procedure for the land conversion. This involves submitting an application to the municipality, town panchayat, or village panchayat, along with supporting land documents and proofs.

Relevant fees may apply, including a scrutiny fee of Rs 1,000 per plot and a land conversion fee of 3% of the market value, as per the Indian Stamp Act, 1899. 

After successful verification, the local authority issues a conversion order, following which the land can be used for non-agricultural purposes.

Housing.com News Viewpoint

The regulations for the sale and purchase of agricultural land may vary from state to state. For property buyers in Tamil Nadu planning to purchase agricultural land, several legal considerations apply. Adhering to local regulations and legal due diligence will safeguard them from potential disputes or other legal hassles in future. Conducting a physical verification of the land site is also crucial, as it allows the buyer to detect any physical issues with the plot. Furthermore, Tamil Nadu is prone to extreme climatic conditions like heavy rainfall. It is important to assess factors such as flooding risk, as land in flood-prone areas may require additional construction measures and financial preparedness.

FAQs