• Buying agricultural land in Karnataka and converting it into commercial land for resort

Hi,

I and a couple of friends want to buy a agricultural land in Karnataka and then convert it into commercial land and build a resort there. 

I have few questions :
1. I don't belong to an agricultural family, but the other two belong to the agricultural family. As a result, I can't have my name on the agricultural land. So, the plan is to buy the agricultural land in either of their names and when we convert it into commercial land, they can add my name. Even though I trust them, I would be much more comfortable if there is a way to get into legal binding here. Also, please note I am an NRI with annual income over 25L and all the earnings are from outside India. Please let me know if its possible. 

2. How long does it usually take to convert the land from agricultural to commercial?( i know its case by case basis, but just wondering what is the rough estimate) 

3. I would also like to know if there are any circumstances where an agricultural land cannot be converted in commercial( so I can check the land doesn't have any of these blockers)

4. Is it possible that we create a company and buy the land in the name of the company, and three of us will be equal shareholders in that company?

Thanks
Vishal
Asked 4 years ago in Property Law
Religion: Hindu

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14 Answers

1) NRI cannot purchase agricultural land

2) do not advance any money for buying agricultural land in friend name

3) there is no guarantee that on conversion your friends will add your name in title documents

4) conversion of land is a tedious process and may take more than a year

5) ) Any company wanting to buy farm land has to go through the high-power committee before approaching the cabinet.

6) Pvt. Ltd. company can buy agricultural land and develop and perform agricultural activities on it, BUT SUBJECT TO the approved provisions of articles and the Memorandum of the pvt.ltd and MUST be approved by the Registrar of Companies

(ROC).

7) The Articles of the Pvt. Ltd. co. should clearly outline the agricultural activities the Pvt. Ltd. proposes to indulge in.

8) Under the Companies Act, a regd. co. may perform those activities that are listed in the Objects, Articles and the memorandum. By virtue of its objects and articles, as regd. under the companies act, the Pvt. Ltd., (now non-person) can function and perform agricultural activities and need not be a agriculturist as in the case of an individual person.

Ajay Sethi
Advocate, Mumbai
87938 Answers
6207 Consultations

5.0 on 5.0

1. There is no way you make it gool proof to add your name after conversion of land into commercial property. If your name is not added after conversion there is no way you can force them doing so legally.

2. It takes time and conversion is discretion of local authority and not legal right of the applicant.

3. If its not adjacent to urban area then chances of conversion is bleak.

4. Company is more suitable option.

I would rather suggest you to avoid the deal.

Devajyoti Barman
Advocate, Kolkata
22515 Answers
402 Consultations

5.0 on 5.0

It will be depends in land to land, whether that particular is freehold land for every point of view.

NRIs are not allowed to buy agricultural land in India. Buying or Selling of agricultural land is a question that is frequently asked my NRIs.

1.NRIs may acquire any immovable property in India other than agricultural/plantation/farm house.

2.While NRIs are not allowed to buy agricultural property. I believe there is no bar on acquiring agricultural land in India by way of inheritance .

3.Agricultural land acquired by inheritance by an NRI can only be sold to a resident in India. That is, you cannot sell to another NRI's.

4. A foreign citizen of non-Indian origin cannot acquire agriculture land/farm house/plantation property in India without the prior approval of the RBI, whereas a foreign citizen of Indian origin can acquire such properties without the prior approval of the RBI but only by way of inheritance. Leasing of immovable property for a period of five years or less is freely permitted.

5.The RBI does not determine the residential status of a person for the purpose of acquisition of immovable property in India. Under Fema regulations, residential status is determined by operation of law. The onus is on the individual to prove his residential status, if questioned by any other authority.

6. Ceiling land or any government acquisition is there on land thanbit could not purchase.

Ganesh Kadam
Advocate, Pune
12335 Answers
191 Consultations

4.9 on 5.0

1. You can not enter in to an agreement which will show your intention of buying an agricultural on any pretext without being an agriculturist since it might be challenged later on. You can provide loan to them by bank transfer and get an agreement executed for refund of the same with profit after they invest it in their business. You can not claim interest since for engaging in to the business of commerciul lending, you shall have to take license from the RBI.

2. You do not whether the agricultural land will be allowed to be converted or not to commercial land. You shall have to cross few hurdles and mention for what commercial purpose you want the conversion. If you fail to manage the clearance from pollution control board, you shall not be memitted to make the said conversion.

3. If your application is complete in details, the District Revenue Authorities will verify the details and inspect the area and the plot for ascertaining that the plot can be converted to commercial use.

4. No. Agricultural land can be purchased by agriculturist only whose yearly income from non agricultural source is less than Rs.1 lakh.

Krishna Kishore Ganguly
Advocate, Kolkata
26602 Answers
726 Consultations

5.0 on 5.0

Dear Concerned,

Do not get into such financial arrangement as mentioned in point 1, there are high chances of cheating.

Point 4 - Yes that the best way create a company being equal shareholders and then buy land - also suggested - outside this friend circle of your's DO GET a second opinion on the actual cost and circle rate of the land - dont get into a situation where you unkowingly end up paying share of the other two as well merely on the pretext of difference between the circle and the actual market rate.

Conversion of agricultural land will happen only if the area concerned is in master plan of the city or the municipal area concerned. hence check that before investing.

Best of luck

Atulay Nehra
Advocate, Noida
1282 Answers
58 Consultations

5.0 on 5.0

1. Since you are a NRI, you cannot invest or directly purchase agricultural land not only in Karnataka, but whole of India.

You can enter into a loan agreement with your friends but this loan should not be based on the agricultural land they now propose to buy.

The other formalities like funding the loan by INR or by any other currency can be decided based on the prevailing circumstances

2. It depends on how you move with the authorities concerned for the purpose after complying the tedious formalities in this regard.

3. It is not necessary that the permission to convert the agricultural land into commercial land has to be granted mandatorily once a person applies for it.

The governmental authority may even refuse or reject the application citing the prevailing law and the reasons therein.

4. A company can be formed with all the three as partners, but you may have to check if a NRI is permitted to invest in the company which would buy the agricultural land for commercial purposes as per RBI guidelines or any other law in vogue.

T Kalaiselvan
Advocate, Vellore
78095 Answers
1543 Consultations

5.0 on 5.0

A. There are two requirements have to be completed under the Land Reforms Act, 1969 to buy agricultural land viz.,

1. You or your family members must be an agriculturist as on date

2. You or your family members income shall not exceed more than 25 Lakh from the other than agricultural sources.

As you said, if others two are belongs to agricultural family by satisfying the aforesaid two requirements that they may buy the land. Further, your name can be include as owner once the land converted from agricultural to non agricultural i.e, Commercial purpose by following legal procedures.

B. Once the required documents submitted before the Revenue Department which means Deputy Commissioner office that land documents would be scrutinized by the DC as to whether the land was granted or not? if granted, was there any perpetual non alienation clause or not? What is the nature of land? and all the documents will be verified as per their parameters.

Hence, it may take odd time depends upon nature of land and work load in DC office and how you involved in the conversion procedure through your network to complete all these task. According to sources, bribe also one of important matter in this procedures. Apart from these, 90 days is general period.

C. In addition to the above clause, as far as the conversion for Commercial purpose is concerned that depends upon CDP/ODP plan is very crucial to verify as to whether the land is coming under the agricultural zone or commercial zone or Industrial zone or sensitive zone? if the land is coming under the agricultural zone is very difficult and impossible to convert the same and if the land is coming under the residential or industrial zone that land need to get the change of land use order first and later you can convert the same. Hence, you need to verify the land zone and Deputy Commissioner will verify as to whether the land belongs to any notification towards the Road proposal or any road widening or any acquisition proposal or not ? Therefore, so many things needs to be verified.

D. You can create the Company or Partnership Firm or Limited Liability Partnership Firm, but the Company cannot buy an agricultural land unless converted the same from agricultural to non agricultural purpose. Hence, the Company or Firm can buy the land after the Conversion. However, the Company can buy agricultural land for educational institution or to achieve religious objectives by obtaining permission under Section 109 of the Karnataka Land Revenue Act, 1964.

B.T. Ravi
Advocate, Bangalore
943 Answers
96 Consultations

5.0 on 5.0

1. NRIs are not allowed to purchase the agricultural land in India.

2. Furthermore, your friends may deceive you by not transferring the land to you after conversion, if at all conversion is permitted.

3. Land conversion is a long drawn process which is likely to span over more than a year.

4. The sanction to a private limited company has to come from the Articles of Association (AoA) and Memorandum of Association (MoA). Furthermore, it requires approval from the Registrar of Companies. These documents must state specifically the scope of activities which the company can pursue. If the purpose of purchasing the agricultural land is beyond the scope of activities mentioned in the AOA and MOA then the land cannot be purchased.

Ashish Davessar
Advocate, Jaipur
30761 Answers
971 Consultations

5.0 on 5.0

1. Non-Agriculturist CANNOT buy Agricultural land, BUT a registered Company CAN buy, with via proper documentations & permissions thru the zonal collectors office.

2. Agricultural Land to NA land (commercial) conversion takes from 3-12 months, subject to proper documentations. AND agricultural lands in eco-sensitive zones CANNOT be converted to NA Land.

3. Indian citizens CAN buy agricultural land, subject to RBI compliances and relevant egilibility.

Keep Smiling .... Hemant Agarwal

Hemant Agarwal
Advocate, Mumbai
5612 Answers
25 Consultations

5.0 on 5.0

Let company buy the land and you can be director in company

Don’t advance any interest free loan

Litigation in India is long drawn and expensive proposition

Ajay Sethi
Advocate, Mumbai
87938 Answers
6207 Consultations

5.0 on 5.0

You can get a loan agreement executed with terms for repayment and the conditions thereon along with the mode of repayment and time.

Please note that the loan repayment shall be claimed within three years from the date of loan or else it will be barred by limitation.

Of course you can renew the loan or extend the repayment by an endorsement .

The loan agreement can be made on a non judicial stamp paper to the value of Rs. 100/-

T Kalaiselvan
Advocate, Vellore
78095 Answers
1543 Consultations

5.0 on 5.0

1) if you want to go through process its very complex process. Any how you want provide a loan agreement to your friends without interest.

2) I can draft a loan agreement for you.

3) If land has to be purchase on your name than RBI norms needs to fullfill by you.

For further detais please call me via consultation call.

Ganesh Kadam
Advocate, Pune
12335 Answers
191 Consultations

4.9 on 5.0

You can do it even if you are not from agricultural family. Procedure takes time and exact time can't be quoted. You can also form company but the procedure will take more time and complexity.

You can convert a agricultural land into industrial land by paying a fee. You can get a 'change of land use' after obtaining the necessary approval from the local authorities. You have to apply to the commissioner of the land revenue department, explaining the purpose of conversion. You have to submit with the application, documents like ID proof, mutation letter, original sale deed/ gift/ partition deed case to case basis, latest tax paid receipt and certified survey map of the said land.

Other details of extent of land, names of the present and previous owners if the said land, kind of soil and crops, mortgages if any also need to be provided.

The district or deputy commissioner, or collector, who is authorised, may permit conversion of land if satisfied that the prescribed conditions have been met and there are no pending dues or litigations on the property. The conversion should also be permissible under the master plan of the area. The outstanding dues should be paid in full and copies of same should be attached.

A conversion order permitting the change in land use alongwith a conversion certificate will be issued.

The Karnataka Land Revenue Act 1966 has prescribed the procedure to convert agricultural land to non-agricultural, under Section 95 of the said Act. The purpose for the change in use of land must be specified in that case to the appropriate authority. The Deputy Commissioner may grant permission and may even impose conditions if any.

You need to submit the Record of Rights and Tenancy Certificate (RTC) in original issued by the revenue authority along with a photocopy of the atlas of the land (survey number), duly attested by the Department of Survey Settlement and Land Records, showing the dimensions with scale and boundary of the land proposed for conversion. In addition to this a photocopy of the revenue survey map of the village showing the location of the land proposed for conversion and the proposed site plan need to be submitted.

The fee charged for change in land use is to be paid as per Rule 107 of the Karnataka Land Revenue Rules 1966. The fee varies for different districts and locations in Karnataka and is mentioned in the website for your reference.

Prashant Nayak
Advocate, Mumbai
27267 Answers
88 Consultations

4.4 on 5.0

1. You can get a loan agreement signed by and between all of you. You shall have to mention what will you get against the said loan provided by you to make it a contract. There shall have to be consideration to be flown from both the sides. It can not be just one way loan.

2. You shall have to mention therein that they will share their profit after making profit in business after converting the plot or refund you the amount if they fail in their effort to start the business by converting the plot.

3. You can also float a company jointly where your said loan will be converted to equity.

Krishna Kishore Ganguly
Advocate, Kolkata
26602 Answers
726 Consultations

5.0 on 5.0

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