The land is a better option for an investment opportunity as compared to other investment options available. It assures to yield the investor greater appreciation and provides the best long-term return. In India, 60.45% of the total land is used for conducting farming activities according to a World Bank report conducted in 2016. When it comes to purchasing land for the use of agricultural activity, buyers have to undergo a lot of details like quality of soil, which elements are in abundance in soil, etc. to better understand the quality of soil and then its usage. In addition, prices of land vary drastically based on different factors such as land use, land market, interest rates, circle rate, and overall real estate value of that particular area.
Hence, it becomes very crucial for buyers and investors to dive deeper into the factors to better understand the scenario. Here are the five major factors that affect the price of the land which is to be used for agricultural activities:
- Location: Location is a significant factor in determining the value of the land. The rate at which the area is developing helps in gauging the future price of the land. Moreover, easy access to roads, airports, train stations, communication & banking facilities, and other infrastructural facilities yields a good value of the land. Also, land which is amid greenery has more value than the one surrounded by industries and companies. With increasing land scarcity, The Indian government is taking effective measures to allot the maximum area of land for conducting agri-activities.
- Quality and Topography of Land: Due care must be taken while buying land for the use of farming. The productivity of land, and the output it will reap, is determined by the quality of the land. A fertile land might give away more output as compared to an unfertile land. Depending on the more and less number of nutrients found in the land, one can decide which crops will be suitable to grow on that land. Hence, the quality of soil and topography can’t be ignored when it is purchased for farming.
- Demand for Land: In simpler terms, whatever is available in abundance and easily saleable, loses its value. And whatever is scarce commands more value. This is called the Law of Demand. The land which is in a prime location - where availability of water, transportation, and other infrastructural facilities is prevalent - has more value and attracts more investors and buyers as compared to the land which is in the outskirts and is not fertile enough for agri-activities.
- Present and Future Use of Land: To keep the industrial pollution and industries under control, sometimes the government puts restrictions on the usage of land. A buyer looking out for a piece of land for building a mall might not purchase it as the chosen land is restricted for construction purposes. This also affects the value of land negatively. Hence, keeping in mind the present and future use, one can better gauge the value of the land.
- Economy: During the economic crisis of 2009, everyone was in dire need of money and wanted to liquidate their landholdings. The demand for land decreased significantly, and the price of land deflated. Moreover, if there is a recession period in the market, the price of the land will be affected negatively and vice versa. This way, various economic factors affect the price of the land.
These were the five major factors that affect the price of land. Although there are still many other factors that help us to determine the price of the land. In the case of agriculture, other factors include the availability of water, electricity, communication and transportation facilities, banking facilities, to name a few.
