Navigating the complexities of property acquisition in India requires a thorough understanding of the legal framework, especially for Non-Resident Indians (NRIs) interested in agricultural land. The primary legislation governing such transactions is the Foreign Exchange Management Act (FEMA), 1999. Under FEMA, NRIs and Overseas Citizens of India (OCIs) are explicitly prohibited from purchasing agricultural land, plantation properties, or farmhouses in India. This restriction aims to safeguard the nation’s agricultural resources and prevent speculative transactions that could disrupt the agrarian economy.

 

Legal Provisions Governing NRI Agricultural Land  Law

The Reserve Bank of India (RBI) and the FEMA, 1999 strictly regulate the acquisition of immovable property by NRIs. As per Section 2(v) of FEMA, agricultural land, plantation property, and farmhouses are categorized as “restricted assets” for NRIs. RBI Master Directions on Acquisition and Transfer of Immovable Property in India (Updated 2023) reaffirm that NRIs are not permitted to purchase agricultural land in India without specific permission from the RBI.

However, inheritance and gifting are notable exceptions under the NRI agricultural land law. An NRI may acquire agricultural land:

  1. By Inheritance – If an NRI inherits agricultural land from a resident Indian, it is legally permissible under FEMA and the Income Tax Act.

  2. By Gift – A resident Indian who owns agricultural land can gift it to an NRI provided the donor is a relative as defined under the Companies Act, 2013.

These exceptions indicate that while direct purchase remains legally impermissible, NRIs can still own such land through inheritance or gifting mechanisms.

 

Government Permissions and RBI Approval under NRI Agricultural Land Law

Despite the outright prohibition under FEMA, an NRI can apply for special permission from the Reserve Bank of India (RBI) to acquire agricultural land in exceptional cases. However, such approvals are rare and granted only when the acquisition aligns with public interest or government policies.

Process for Seeking RBI Approval:

  1. Application to RBI – The NRI must submit a formal request under Section 6(3) of FEMA, detailing the purpose of acquisition and its intended use.

  2. State Government Consultation – Since land is a state subject, RBI may seek the state government’s opinion on whether the acquisition should be permitted.

  3. Evaluation of Public Interest – If the purchase is linked to agricultural development, research, or any initiative benefiting farmers, the RBI may consider granting approval.

  4. Final Decision by RBI – If approved, the transaction must be reported under FEMA compliance norms, ensuring it does not violate foreign exchange regulations.

It is crucial to note that such approvals are discretionary and not a legal right. In practice, the RBI has rarely permitted NRIs to purchase agricultural land unless the request is backed by substantial agricultural or public welfare objectives.

 

Legal Consequences of Violating NRI Agricultural Land Law

Any unauthorized purchase of agricultural land by an NRI is a violation of FEMA, 1999 and can attract serious legal consequences. The Enforcement Directorate (ED) and RBI actively monitor transactions to ensure compliance with foreign exchange regulations.

Penalties and Legal Repercussions:

  1. Void Transaction – If an NRI purchases agricultural land without approval, the transaction is considered null and void, meaning no legal rights over the land are conferred.

  2. Monetary Penalties – Under Section 13 of FEMA, an NRI can face penalties amounting to three times the transaction value or ₹2 lakh, whichever is higher.

  3. Confiscation of Property – Authorities have the power to seize the land under the FEMA (Adjudication Proceedings and Appeal) Rules, 2000.

  4. Criminal Prosecution – If fraudulent methods, such as benami transactions, are used, the NRI may face additional charges under the Benami Transactions (Prohibition) Act, 1988, leading to criminal prosecution.

  5. Forced Divestment – In some cases, the RBI may order the NRI to dispose of the land within a prescribed period and remit the proceeds per FEMA norms.

Given these severe consequences, legal due diligence and adherence to NRI agricultural land law are critical before attempting any real estate transactions involving the agricultural property.

 

Alternatives for NRIs Under NRI Agricultural Land Law

Since direct purchase of agricultural land is prohibited, NRIs seeking investment opportunities in India’s agrarian sector can explore legally viable alternatives:

  1. Investment in Agribusiness Companies

NRIs can invest in agricultural enterprises through Foreign Direct Investment (FDI). 100% FDI is permitted in agriculture-related businesses, including horticulture, food processing, and agritech startups.

  1. Leasing Agricultural Land

While purchasing is restricted, some states allow leasing agricultural land for farming or allied activities. NRIs should verify state-specific tenancy laws before entering into long-term leases.

  1. Investment via Indian Companies

If an NRI is a shareholder in an Indian company engaged in agriculture, the company itself can acquire land subject to state land ceiling laws. However, FEMA and Companies Act, 2013 compliance is mandatory.

  1. Participating in Agri-Based Real Estate Funds

Some Real Estate Investment Trusts (REITs) and agri-based funds provide exposure to agricultural assets without direct ownership.

These alternatives ensure compliance with NRI agricultural land law while allowing NRIs to engage in India’s thriving agricultural sector.

 

Conclusion

The restrictions on NRIs purchasing agricultural land in India stem from FEMA, 1999, which categorizes such land as a restricted asset. Unless acquired through inheritance or gifting, an NRI cannot legally buy agricultural property. Attempts to bypass these rules through proxy ownership, benami transactions, or unauthorized purchases can result in penalties, confiscation, and legal action under FEMA, RBI regulations, and the Benami Transactions Act.

For NRIs interested in India’s agricultural sector, lawful alternatives such as agribusiness investments, leasing, and FDI in agriculture-related ventures offer compliant ways to participate. Given the legal complexities, seeking expert legal consultation before any transaction involving agricultural land is essential to ensure adherence to NRI agricultural land law and avoid unintended legal consequences.

 

FAQs on NRI Agricultural Land Law

  1. Can an NRI purchase agricultural land in India?

No, under FEMA, 1999, NRIs are not allowed to purchase agricultural land, plantation property, or farmhouses in India. However, they can acquire such land through inheritance or by receiving it as a gift from a relative.

  1. Can an NRI lease agricultural land in India?

Yes, some Indian states allow NRIs to lease agricultural land for farming activities. However, state-specific tenancy laws apply, and long-term leases may be scrutinized for indirect ownership implications.

  1. What happens if an NRI illegally purchases agricultural land?

Any unauthorized purchase is void, and the NRI may face penalties under FEMA, including monetary fines, confiscation of land, and even legal prosecution under the Benami Transactions Act.

  1. Can an NRI invest in agriculture without buying land?

Yes, NRIs can invest in agricultural businesses, FDI-compliant agritech startups, and agri-based real estate funds, which provide indirect exposure to the sector while remaining legally compliant.

  1. How can an NRI inherit agricultural land in India?

An NRI can inherit agricultural land from a resident Indian as per FEMA and the Income Tax Act. However, selling such land may require special approval from the RBI, depending on the transaction structure.