Land Cost Per Acre in India: Exploring Village Farm Land Cost and Agriculture Land Cost Per Acre

Understanding the dynamics of land costs in India, we explore the fascinating domain of land costs for agriculture and industry. This blog navigates the complex environment and clarifies the subtle elements impacting land costs per acre across many industries using concise and authoritative statistics.

Land Cost Per Acre in India

Overview of Land Cost in India

India’s land cost, a measure of the price of a plot of land per unit area, has seen a significant increase in recent years. The average land cost in India was 157.919 in March 2023, a 0.32% increase from the previous quarter and 10.77% from the same quarter last year, according to some sources. Pune experienced the highest annual price growth in March 2023, with a 33.33% increase, ahead of Chennai (24.6%) and Jaipur (21.88%).

Mumbai and Delhi, the two most expensive cities in India, saw moderate increases of 8.84% and 17.01%, respectively. The land cost in India varies depending on the location and type of property. The supply and demand states of the real estate market, particularly the COVID-19 pandemic, have also influenced the cost. However, the market has shown signs of recovery and resilience in 2022 and 2023.

Factors Influencing Land Cost

1. Urbanization Trends: The burgeoning urban landscape significantly impacts land costs in India. Rapid urbanization leads to increased demand for land, driving prices upward.
2. Infrastructure Development: Proximity to well-developed infrastructure, such as highways and airports, escalates land values. Access to these facilities enhances the overall appeal of the land for various purposes.
3. Government Policies: Regulatory policies and land-use planning by the government play a pivotal role. Stringent regulations or incentives can influence the cost dynamics.
4. Market Demand: Supply and demand directly affect land costs. High demand in a particular region or city can lead to an upsurge in land prices.
5. Geographical Location: Land prices vary based on the geographical location. Proximity to coastlines, scenic landscapes, or industrial hubs can significantly impact the overall cost.
6. Land Utility: The purpose for which the land is designated affects its cost. Residential, commercial, or industrial zoning carries distinct price points.
7. Land Accessibility: Easy accessibility, whether through roads or public transportation, positively correlates with land cost. Well-connected areas tend to command higher prices.
8. Environmental Factors: The ecological value of the land, including factors like soil quality and ecological sensitivity, contributes to its cost.

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Land Cost Variation Across Indian States

1. Land costs vary significantly across Indian states due to diverse factors like urbanization, economic development, and geographical location.
2. Northeastern states generally exhibit lower land costs, influenced by agrarian economies and lower population density.
3. Southern states like Karnataka and Tamil Nadu experience moderate land prices, balancing urbanization and agricultural activities.
4. The intricate interplay of regional dynamics shapes the complex landscape of land cost variations in India.

Urban Land Cost vs. Rural Land Cost

Since land is in such great demand and limited supply in India, it is one of the most valuable assets. Land costs vary according to its location, quality, infrastructure, potential for development, and other elements. Urban property often costs more than rural land because it provides more options for social amenities, economic activity, and connection. However, since various states have varying degrees of industrialization, urbanization, and agricultural output, the difference in land values between urban and rural areas is not consistent nationwide.

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Agricultural Land Cost

In India, agricultural land has significant value since it serves as the primary means of sustenance for over half of the people, given that agriculture is the backbone of their survival. However, the price of agricultural land varies widely across different states and regions, depending on factors such as soil quality, water availability, infrastructure, demand and supply, and government policies.

Residential Land Cost

States in India have different prices for residential land because of things like demand and location. A thorough examination finds variations impacted by financial factors. Prices are normally cheaper in the northern states, although owing to urbanization developments, prices may be higher in the southern areas. Population density and infrastructure development are two factors that affect this complex terrain.

Commercial Land Cost

Commercial land is a type of property that is used for business purposes, such as offices, shops, hotels, malls, etc. Commercial land is usually more expensive than residential land, as it has higher demand and potential for income generation. However, the cost of commercial land also depends on various factors, such as location, size, infrastructure, amenities, zoning, etc.

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Industrial Land Cost

Industrial land is a type of land that is used for industrial purposes, such as manufacturing, warehousing, logistics, etc. Industrial land is usually located in designated industrial zones or parks, where the government or private developers provide infrastructure and facilities. Industrial land is also subject to various regulations and policies that affect its availability, price, and development.

The cost of industrial land in India depends on several factors, such as location, size, demand, supply, infrastructure, amenities, connectivity, etc. The cost of industrial land can also vary significantly across different states, depending on the level of industrialization, economic development, land availability, etc.

Land Cost in Special Economic Zones (SEZs)

Special Economic Zones (SEZs) are designated areas within a country that offer various incentives and benefits to attract investments, boost exports, and create employment. SEZs have been operational in India since 2000, and the SEZ Act of 2005 provides the legal framework for their establishment, development, and management. As of January 2023, there were 270 operational SEZs in India, spread across various sectors such as IT, biotechnology, textiles, gems, pharmaceuticals, etc.

One of the key factors that influence investors’ decision to set up units in SEZs is the land cost. Land cost refers to the price of acquiring land for developing SEZs or setting up units within them. Land cost varies depending on the location, size, type, and availability of land. Land cost also depends on the demand and supply of land, which is influenced by factors such as economic growth, infrastructure development, population density, etc.

The table shows that Maharashtra, Karnataka, and Haryana have the highest average land costs per acre in SEZs in India. Kerala and Uttar Pradesh have the lowest average land cost per acre in SEZs in India, followed by Andhra Pradesh. The land cost in SEZs in India also varies within each state, depending on the location and type of SEZ.

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Land Cost in Metro Cities

Economic growth and infrastructure development are key factors in determining a city’s land price. Cities with higher GDP growth rates have higher demand for land and higher prices, as seen in Mumbai, Hyderabad, and Bangalore. Infrastructure development affects connectivity and accessibility, affecting land value. 

Cities with better infrastructure facilities, such as roads, railways, airports, and metros, tend to have higher land prices. Gurgaon and Hyderabad have seen significant increases in land prices of over 200% since the pre-pandemic phase due to better infrastructure. Government policies also influence land prices, with policies restricting land supply, such as zoning regulations, increasing prices, and encouraging land use through tax incentives, subsidies, and affordable housing schemes, decreasing prices.

Land Cost in Tier-2 and Tier-3 Cities

Tier-2 cities are those that have a population of 50,000 to 99,999, while Tier-3 cities are those that have a population of 20,000 to 49,999. Some examples of tier-2 cities are Ahmedabad, Chandigarh, Dehradun, Kanpur, Patna, Jaipur, Cochin, Pondicherry, etc. Some examples of tier-3 cities are Guwahati, Amritsar, Surat, Vadodara, Nashik, Trichy, etc.

Land in these cities is cheaper than in metro or tier-1 cities. You can get more land for the same amount of money.

1. Land in these cities has a higher potential for appreciation due to the increasing demand for residential and commercial spaces.
2. Land in these cities offers better returns on investment due to the lower risk and higher rental income.
3. Land in these cities can be used for various purposes, such as agriculture, industry, tourism, education, etc.
4. Land in these cities can benefit from government schemes and initiatives such as Jawaharlal Nehru National Urban Renewal Mission (JNNURM), UDAN (Ude Desh ka Aam Nagrik), Smart Cities Mission, etc.

Land Cost in Tourist Destinations

India is a diverse and beautiful country that attracts millions of tourists every year. The tourism industry is one of the major contributors to the Indian economy, generating revenue, employment, and foreign exchange.

As you can see, Goa has the highest land cost per acre among the tourist states, followed by Kerala. This is because these states have a high demand for land due to their popularity among domestic and foreign tourists. They also have a limited supply of land due to their geographical features and environmental regulations.

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On the other hand, Assam has the lowest land cost per acre among the tourist states, followed by Meghalaya. This is because these states have a low demand for land due to their lower tourist footfall and accessibility issues. They also have a large supply of land due to their vast area and agricultural potential.

Land Cost in Coastal Areas

There are many reasons why land in coastal locations costs different in each Indian state. A number of factors, such as geographical characteristics, proximity to metropolitan areas, and developmental initiatives, influence these differences. Because of tourism, infrastructural development, and picturesque scenery, coastal areas in states like Maharashtra and Goa sometimes have higher land prices.

 Conversely, states like West Bengal and Odisha, which see fewer tourists and less urbanization, tend to have cheaper land costs. Environmental rules and government policy also influence land costs. These complex factors must be taken into account while evaluating land prices in coastal areas of all Indian states.

Government Policies and Land Acquisition Costs

Land acquisition in India is a contentious issue involving the government, landowners, project developers, and affected communities. The cost of land acquisition depends on factors like location, market value, type of land, purpose, and compensation norms. The 2013 LARR Act replaced the 1894 Act, providing compensation to landowners and extending rehabilitation and resettlement benefits to those affected. 

The minimum compensation is based on market value and other factors. The Act also introduced changes in land acquisition processes, including compulsory social-impact studies. While some praised the 2013 LARR Act as progressive, others criticized it for being too stringent and impractical for development projects. In 2015, the NDA government proposed amendments to the Act, but these still needed to be passed. As a result, some states have enacted their land acquisition laws.

Conclusion

Factors like urbanization, infrastructure, government policies, and market demand influence India’s land cost dynamics. Prices vary across states, with urban areas and tourist destinations experiencing higher prices. Tier-2 and tier-3 cities offer more affordable options. Coastal areas have fluctuating costs due to tourism, development, and environmental regulations. The 2013 LARR Act affects compensation norms and development projects.

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