‘Buy land, they are not making it anymore’ a quote by Mark Twain, emphasises the importance of Agri-Realty and its immense value. India presently has one of the lowest lands holding per capita, lower than the global average. According to the Agriculture Census, the total number of operational holdings in India numbered at 138.35 million with an average size of 1.15 hectares per capita. Of the total holdings, 85 per cent are in marginal and small farm categories of less than 2 hectares.

India is currently the second most populated country in the world but with a small land area, smaller than China with a similar population. In such a reason agriculture land has become extremely valuable and difficult to acquire. The value of land has increased from 3-fold to 100-fold rise since 2000. There has been a country wide spike in the price of agricultural land due to a variety of reasons. All of India’s agriculture land was valued at over $2 trillion in 2010 and today it has grown to about $10 trillion today. To put this figure into perspective it is larger than the value of all the gold ever mined.

The size of agri land market in India is around $15 billion and around 3 million transactions (changing the property rights from one person to the other) happened in FY18–19. Middle class to high net worth investors looking to invest in agriculture lands are considered an alternative asset class. According to the World Bank, India’s middle class is about 300 million and about 40 million people making up the higher middle class. Their average disposable income has grown year after year leading into investment in agri realty.

Agriculture lands have outperformed most asset classes throughout history, particularly on a risk basis when considering volatility. The NCREIF Index which is the world’s agriculture benchmark has yielded an annual return of 13.69% since 2000 with a standard deviation of only 7.58%. This far outperforms equities, bonds and other asset classes. Performance is expected to improve further over the next decade due to strong demand supply fundamentals.

“You buy 100 acres of farm land and it will produce for you every year. You can buy more farmland, and all kinds of things, and you still have 100 acres of farmland at the end of 100 years.” – Warren Buffet

As the turmoil of a recession kicks in it pays to invest in real things with real production. Faith in fiat currencies may waiver, bonds and stocks will fall or crash but people will always need to eat. They’re not making more land but we are making people. Investing in the agriculture land and that can feed to the people might be the best financial decision you can make.

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