Can NRI Hold Agricultural Land In India?

‍Can NRI hold agricultural land in India? This is a huge question that Indians have been debating for decades! We’re here to end this debate once and for all.

According to Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) laws, both NRIs and OCIs cannot buy or acquire agricultural property, plantations, or farmhouses in India unless they get authorization from the Reserve Bank of India (RBI).

Many NRIs aren’t well-versed in Indian property laws, and the issue around the acquisition of agricultural land in India can be confusing. So to be of help, I had to dig deep into the legalities of agricultural property ownership in India. I also had to extract reliable information from the NRI Money Clinic in their interview with Sriram V. Rao, a practicing chartered accountant and specialist in Indian property laws.

‍Who is an NRI under the Indian Law?

Before going deeper into the legalities of NRI property ownership in India, it’s important to understand who is considered an NRI, PIO, and OCI.

Under the Act of Foreign Exchange Management (FEMA), NRIs (not a person resident) are Indian residents who have been away from the country for more than 182 days and are not foreign nationals.

On the other hand, a PIO is a Person of Indian Origin. This means that a PIO can be a citizen of any other country other than Pakistan and Bangladesh who holds (or at one point) held an Indian passport. This can be because either his grandparents or parents were Indian citizens.

On the same note, an OCI means Overseas Citizen of India. This means that an NRI or PIO can be an OCI so they’re all on the same parity as far as Foreign Exchange Management Act (FEMA) is concerned, so can OCI buy agricultural land?

What is FEMA, and what does it say about NRIs holding land in India?

Constituted in 1999, the Foreign Exchange Management Act (FEMA) is India’s legal framework that governs international trade, remittances, and transactions involving NRIs, as well as the expansion of India’s foreign exchange market.

It’s this act that governs NRIs’ relationship with NRI agricultural land in India. The law makes it clear that NRIs aren’t allowed to purchase agricultural land in India, farmhouses, plantation properties, and associated properties.

But there’s a loophole that can be explored by NRIs. As an NRI, you can apply for special permission from the Reserve Bank of India (RBI) to directly buy agricultural land in India. The RBI will have to consider several factors, but, likely, you won’t be granted that special permission to buy agricultural property.

So if you’re still planning to seek this special permission, you can apply to the RBI’s Chief General Manager at the following address:

The General Manager,

The Reserve  Bank of India (RBI),

Foreign Investment Division,

Centre Office, Department of Exchange Control, Foreign Sub-division (III),

Mumbai: 300 002.

So can NRI hold or purchase agricultural land in India?

The law is very clear when it comes to NRIs holding agricultural land in India. FEMA states that NRIs cannot buy agricultural land in India, plantations, or farmhouses.

However, they’re allowed to purchase agricultural land gifts or transfer such property in India without prior approval.

Can NRIs inherit agricultural land in India?

There's a silver lining to holding your agriculture land. Even though you can't own land, you can still inherit agricultural land in India. So, if your old grandpa has a farm in India and he decides to leave it to you with a legal heir certificate, you can still own it. Just don't get too excited, because you can't use it for agricultural purposes. You can only lease it out or sell agricultural lands to an Indian citizen.

Now, you may be thinking, "But why? Why can't I own land in my own country?" Well, the Indian government wants to protect its agricultural properties from foreign investors. They believe that allowing NRIs to own land would lead to a decline in the number of small farmers, which would be bad news for the economy.

So, NRIs can't own agricultural land in India, but they can inherit it. Just remember, if you do inherit agricultural land, So can NRI sell inherited property?

Alternatives for NRIs: exploring lease and joint ventures

You can't own agricultural land in India, but that doesn't mean you can't invest in the industry. There are a couple of alternatives that you can explore, Let’s explore them.

Lease it out

One option is to lease the land from an Indian citizen. You can negotiate a lease agreement that allows you to use the land for a specific period, and in return, you pay the owner a predetermined amount of money.

This may not be as exciting as owning the land, but it's a great way to get your foot in the door. Plus, you don't have to worry about the hassles of managing the land or dealing with agricultural regulations after you put in an offer to sell proceeds.

Joint ventures

Another option is to form a joint venture with an Indian citizen. In this scenario, you partner with an Indian citizen to buy and manage the land together. You can split the profits and share the responsibilities like income tax.

This option requires more work and investment, but it can be very lucrative if you find the right partner. Plus, you get the satisfaction of being a part of the Indian agricultural industry.

The table breakdown

Two alternatives for NRIs who want to invest in the Indian agricultural industry. Whether you decide to lease or form a joint venture, there are opportunities. Just make sure you do your research and find a reputable partner. Who knows, you may just end up with a successful business venture and a newfound love for farming!

Navigating land acquisition tips as an NRI

Do you want to acquire some NRI agricultural land in India? NRI agricultural land involves various regulations and restrictions that NRIs need to be aware of.

Understanding the laws and regulations

First things first, you need to understand the laws and regulations around NRI agricultural land ownership in India. As we've discussed before, NRIs cannot own agricultural land in India. However, you can explore alternative options like leases or joint ventures. Be sure to research the legal requirements for each option, as well as any restrictions or limitations.

Finding a reliable agent or lawyer

Once you've identified the type of land acquisition that works for you, it's important to find a reliable agent or lawyer to help you navigate the process. It's also a good idea to get references and read reviews from other NRIs who have worked with them in the past.

Conducting due diligence

Before making any decisions or signing any agreements, conduct due diligence on the land and the seller. You can also conduct a soil test to ensure the land is suitable for your intended use.

Negotiating the deal

Once you've done your due diligence and are satisfied with the land and the seller, it's time to negotiate the deal. Be prepared to negotiate on price, terms, and conditions.

Funding the purchase

Funding the purchase can be a bit tricky for NRIs. You'll need to explore financing options that work for you, such as taking out a loan from the Indian Reserve Bank of India or using your funds.

Finalizing the purchase

Once you've negotiated the deal and secured funding, it's time to finalize and purchase land with your capital assets. This will involve signing legal agreements, registering as commercial property, and paying any associated fees and taxes.

Navigating land acquisition as an NRI can be a challenging process, but with the right research, preparation, and support, it's possible to achieve your goals.

Investment opportunities for NRIs in India's agricultural industry

There are several opportunities for NRIs to invest in India's agricultural sector. Here are some tips to help you get started.

Identify opportunities

You need to identify opportunities in the agricultural sector that match your investment goals in rural and urban areas. Such as investing in agribusinesses, food processing companies, or supply chain management companies.

Research the market

Once you've identified investment opportunities, research the market to understand the trends, challenges, and opportunities.

Partner with local experts

Local experts can provide valuable insights into the market and help navigate the legal and logistical hurdles. Look for local partners who have experience in the agricultural industry and who share your values and goals.

Assess the risks

Like any investment, investing in India's agricultural industry comes with risks. These can include weather-related risks, supply chain disruptions, or regulatory changes. Assess these risks and develop a risk management strategy.

Invest responsibly

Investing is not just about making a profit - it's also about supporting sustainable and responsible agricultural practices. Look for opportunities to invest in companies or projects that prioritize social and environmental sustainability. Purchase property and invest.

Investing in India's agricultural industry as an NRI is a great way to support the sector and make a positive impact. While NRIs cannot acquire NRI agricultural land in India, they can purchase commercial and residential properties in certain circumstances. For your residential and commercial property, there are no strict restrictions.