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    1. SMERGERS
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    3. Indian Managed Farmland
    Indian Managed Farmland

    India's Arable Land:
    159.7 million hectares

    Capital Appreciation of Indian Farmland:
    30%

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    Indian Managed Farmland Industry

    Managed farmland is a system where individuals can put their money in a farm plot and then watch their assets grow without having to manage it themselves.

     

    Revenue Streams

    Companies involved in this sector have two revenue streams:
    • - Sale of land
    • - Sale of produce: companies sell a farm plot to an individual, sign a contract to carry out agricultural activities on the land, and share the profits from the harvest.

     

    Regulatory Environment

    The Seventh Schedule of the Indian Constitution puts "Land" under the State List. This means states have the autonomy to legislate matters related to land. 1

     

    State-wise Rules

    Each state has different laws:
    • - Non-agriculturalists can buy agricultural land in Kerala, Tamil Nadu, Karnataka, MP, Rajasthan, and UP.
    • - Only agriculturalists can buy agricultural land in Maharashtra, Gujarat, and Himachal Pradesh. 2

     

    State

    Land laws 3

    Agricultural land (ha)
     
    Tamil Nadu
    • - Maximum of 59.95 acres of agricultural land can be purchased.
    • - In case of no agricultural activity in the last 10 years, the land can be converted into non-agricultural one by order of the district collector

    5,942 4
     
     
    Karnataka
    • - Necessary approvals from the Deputy Commissioner must be sought
    • - The annual income of the individual cannot exceed INR 25 lakh
    • - Investor is not allowed to convert the land
    • - It is essential to begin farming on the land within one year from the date of purchase
    • - State government can confiscate land if farming is stopped in five years of purchase


    12,843 5
     
    Kerala
    • - Anyone except NRIs can purchase agricultural land
    • - For an adult unmarried or only surviving member of family, the ceiling limit is 7.5 acres
    • - Family of 2-5 persons, the ceiling limit is 15 acres; family over 5, the ceiling limit is 20 acres

    2,232 6
     
    Andhra Pradesh
    • - Non-farmers can also purchase land
    • - A family unit (individual, spouse and three minors) can purchase a maximum of 10 acres of Class A land (irrigated and  double-cropped wetland)
    • - A family unit can purchase at most 54 acres of Class K land (dry and non-irrigated land)

    8,828 7
       
    Maharashtra
    • - Only farmers can buy agricultural land; if one of the parents or grandparents is a farmer, the person is also deemed a farmer
    • - In addition to any other agricultural land anywhere in India, the person can purchase it in the said state
    • - Maximum of 54 acres of agricultural land can be purchased

    20,589 8
     

    Growth Drivers

    One of the potential growth drivers is the rise of farmland as an investment mode that can generate passive income.

     

     

    India’s Arable Land

    India’s arable land area of 159.7 million hectares (394.6 million acres) is the second largest in the world after the USA. 9




     

    Capital Appreciation

    Capital appreciation of Indian agricultural land is 30%. 10

     

    Land Prices

    The average price of agricultural land in six Indian states is ₹67.5 lakh/acre. The average price in Karnataka stands at ₹93 lakh/acre. 12

     

     

    Key Players in the Industry

     

        - Hosachiguru
    • - Nature’s Cluster
    • - Vista Estates
    • - Smart Agro
    • - Holiday Valley
    • - Divine Euphoria
    • - Jain Farms
    • - Vibez Estate

     

    Farmland’s Total Investment Returns vs. Other Asset Classes 

    Farmland offers a unique advantage over assets like gold or commercial real estate by delivering higher total returns. From 1992 to 2022, farmland's average annual return of 10.71% outperformed other asset classes, with gold being the lowest at 5.42%, debunking the myth of gold as the ideal inflation hedge.13

     

    Asset Class

    Average Annual Return
    Farmland
    10.71%
    US Stocks
    9.58%
    US REITs
    9.43%
    Real Estate
    8.39%
    Gold
    5.42%

     

    Porter’s Five Forces

    • - Threat of Substitutes - Moderate to High. There is no direct substitute for agricultural land, however, individuals may choose residential real estate, treasury bonds, or mutual funds as a substitute for investing in agricultural land.
    • - Threat of New Entrants - Low. Setting up a new managed farmland business requires significant investment and time for purchasing the land inventory, navigating the regulatory hurdles, and negotiating with landowners.
    • - Existing Competitive Rivalry - Low to Moderate. The managed farmland market in India is not highly competitive due to the absence of conglomerates and behemoths in this industry. There are no big players in the industry who may make this industry a monopoly, duopoly, or oligopoly.
    • - Bargaining Power of Customers - Moderate. While buyers do have some power due to the early stage of the industry and multiple companies offering the same product/service, it is difficult for an individual to buy agricultural land themselves.
    • - Bargaining Power of Suppliers - Low to Moderate. Agricultural land is the main input for a managed farmland company. The owners of the land are generally farmers and agriculturalists, and the final decision of parting with the land is with the owner even if the specific state allows. However, a large amount of agricultural land reduces the bargaining power.

     

    Sources:

      1. 1. https://www.businessresearchinsights.com/market-reports/online-community-and-social-business-software-market-109084

      2. 2. https://www.grandviewresearch.com/industry-analysis/software-market-report

      3. 3. https://www.higherlogic.com/blog/online-communities-key-facts-statistics-2020/

      4. 4. https://finance.yahoo.com/quote/GDDY/key-statistics

      5. 5. https://finance.yahoo.com/quote/SHOP/key-statistic

      6. 6. https://stockanalysis.com/quote/asx/TNE/financials/

      7. 7. https://finance.yahoo.com/quote/WIX/key-statistics                               

      8. 8. https://finance.yahoo.com/quote/SQSP/key-statistics

      9. 9. https://www.techradar.com/news/vista-equity-partners-purchases-acquia-in-dollar1bn-acquisition

      10. 10. https://www.insightpartners.com/ideas/insight-venture-partners-invests-in-episerver/

      11. 11. https://www.eweek.com/enterprise-apps/jive-software-acquired-for-462-million-by-private-equity-firm/

       

       

     

     

     


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