For the longest time,
the price of farmland in Vadicherla stayed below Rs. 20,000 an acre. 10 years
ago, that began to change.
"In 2003, an
acre cost Rs. 25,000. By 2006-07, it had
climbed to Rs. 2 lakh," says Mr. Byru Veeraiah, sarpanch of this village
in Andhra Pradesh's Mehbubnagar district."
By 2010, an acre cost
Rs. 3 lakh. And Rs. 12 lakh by 2012."
It was a puzzling
spike. This village, with 700-odd families, is nowhere near large cities.
Warangal, the nearest large town, is 100 km away. The Vijayawada - Hyderabad
highway is a good 15 km away. No farmland in the village or its vicinity was
being bought by the government or companies.
Vadicherla is not
alone.
In 10 years, the
price of an acre in Ramavarapadu, a village next to Vijayawada, has leapt from
Rs. 7 lakh to Rs. 7 crore. Or take Mardi, 15 km off Solapur, Maharashtra.
The price of an acre
in this village, says Mr. Prakash Arjun Kate, a local, has "climbed from
Rs. 20,000-25,000 10 years ago to Rs 10 lakh now." Ramavarapadu, Vadicherla
and Mardi are not isolated instances. Microstudies and anecdotal information on
68 villages in 7 states gathered by ET suggest a lot of rural India is seeing a
similar climb in farmland prices, primarily because of highways, investors and
urbanisation.
Great rural land
rush: 3 to 100-fold rise in property prices may not bode well
"This is true
for almost all of India, perhaps barring only the north-east and Kashmir,"
says Mr. R.S. Deshpande, former director of Bangalore's Institute for Social
and Economic Change (ISEC).
For the longest time,
farmland markets were comatose. Land ceiling laws, designed to prevent
concentration of land ownership, were one reason. Another reason, as academic
Sanjoy Chakravorty writes in 'The Price of Land: Acquisition, Conflict,
Consequence', his book on land acquisition in India, was the limited reason to
buy land.
He writes: "If
land's value is a measure of its future income, and if the future use is not
dramatically different from its current use, a sale is possible only if a
buyer's evaluation of the discounted future income stream is more than the
buyer's valuation of the same."
The wheels are
turning faster on both counts. New buyers, with a different assessment of
value, are entering the market. In Vadicherla, for instance, says sarpanch
Veeraiah, "people from Hyderabad, Warangal and NRIs are buying land."
At the point where the road to the village meets the Suryapet-Warangal road,
investors from Suryapet have marked plots to build houses, and are waiting for
buyers to come. In Ramavarapdu, outsiders are building four- and five-floor
apartment blocks on what used to be farmland.
Elsewhere, investors
are converting agricultural land into commercial use. Or, / they are just holding on to it, waiting for
its value to appreciate to offload it in the market.
The resultant spike
in farmland prices is leaving its imprimatur on rural India. It is giving
farmers seeking to leave agriculture an exit option. It is also pulling an
unknown quantum of land out of agriculture.
As land rates rise,
farmers are unable to buy farmland in their own villages. As such, it is
reshaping the ownership of land. And it's all coming about because a trinity is
converging on it - investors looking to buy, farmers looking to exit
agriculture, and politicians and their associates looking to create a
marketplace for such transactions.
Investment Return
Since 2000
Farmland 26.2%
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(BSE Sesnsex) 19.8%
Gold 13.7%
Src: ET
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