A first of its kind agri-land price index that will serve as a reliable source and benchmarking land prices in rural and semi-urban areas was launched here on Thursday.
Developed by the Mishra Centre for Financial Markets and Economy at the Indian Institute of Management, Ahmedabad (IIM-A) along with SFarmsIndia, a private firm dealing in land prices, the IIMA-SFarmsIndia Agri Land Price Index (ISALPI) is claimed to help and signal potential conversion of agriculture land into real estate.
“Unlike financial assets, developing an index for land parcels is a complex task because of the visible price difference in different listings caused by a slew of factors including the market wide supply-demand factors. The method adopted for the preparation of this Index addresses these disparities and ensures accuracy. Regression-based hedonic pricing method has been used to come up with this Index,” said Prashant Das, project lead and associate professor of Real Estate Finance at IIMA.
The Index will be useful for policy makers, local governments, environmentalists, investors, real estate developers and financiers, Das and SFarmsIndia’s Kamesh Mupparaju said. SFarmsIndia is into data warehousing and mining aimed at agri-domain specific AI capabilities to the market connecting prospective buyers and sellers.
Asked if the focus is more on investors and real estate sectors rather than farmers’ — especially the small land holding farmers — who potentially need to benefit from the Index, Das said: “The farmers can partner with agriculture entrepreneurs. AgTech is a rising sector. With this endeavour, we are trying to show that agriculture is a promising field.”
When asked how the Index will be able to deal with the difference between the actual rates of transactions and the circle rates, Das questioned the very need of circle rates but added: “An area will potentially have a larger impact with this Index. We are not saying that Circle rates don’t help but it is an evolving process and markets will decide in the long term.”
Mupparaju added: “With facilitating this index, we are not selling or buying. If someone wants to buy or sell a piece of land, we are only providing a fair option.”
Explaining the reasons for coming up with such an Index, Das told mediapersons at the launch event of the ISALPI here: “Almost 80 per cent of agri-households are self employed and 70 per cent of them are in crop production. The return from the agricultural land when cultivated is often too less (may be 0.5 – 2 per cent) but the capital appreciation is far more (30 per cent). For multiple reasons, more and more agricultural land is being sold and we just wanted to set up a system to bring in more transparency.”
Currently, the data available is only from six states — Uttar Pradesh, Maharashtra, Andhra Pradesh, Karnataka, Telangana and Tamil Nadu – and with data from more states in the pipeline, Das said: “We should be able to bring in more accuracy and a more granular index at regional level.”
The ISALPI would be hosted as part of the Mishra Centre for Financial Markets and Economy at the Indian Institute of Management, Ahmedabad (IIM-A) website.