Agricultural industries are the economic backbone of progressive countries. The development of this industry acts as a forceful tool in eradicating poverty, food insecurity, and unemployment. A surplus amount of food is grown and produced each year to meet the increasing demands of the global population. Yet, millions of people still go hungry leading to a surge in food insecurity. Moreover, the extreme changes in the climate and massive wave of urbanization have resulted in the loss of millions of acres of agricultural farmlands. These issues have grasped the attention of policymakers around the world leading to the increasing significance of the agricultural sector. As a result, agricultural farmlands are becoming quite popular among investors and buyers. These farmlands are worth more than economic gains. An eco-sustainable practice provides social and ecological benefits as well. These farmlands are becoming valuable assets for investors acting as scarce commodities, whose value appreciates over time. In Pakistan, the agricultural industry is one of the largest industries in the country. The agricultural farmlands contribute greatly to the local and national economy of the country by supporting profitable secondary industries and providing job opportunities and other services. However, the radical climate changes have destroyed crops and farmlands beyond unimaginable proportions, looming the food crisis in the country. Also, inflation is not only causing a cost surge in food items but also positively affecting the value of farmland as well. Therefore, farmland investors and produce growers are greatly benefiting from the current situation contributing to the economy of the country as well.
The situation of Agriculture Farmlands of Pakistan
Pakistan is an agricultural country. A majority of its population earns living in the agriculture sector due to inadequate resources, education, and jobs. The agricultural sector is considered the backbone of the economy where it grew by 4.4% showing great progress as compared to last year (Shah, 2022). This growth is due to better yield, governmental support and effective policies, and subsidies on fertilizers and other commodities. In the past, agricultural farmlands were considered gold mines as they generated great profit and income. Therefore, selling such land was a big deal. However, destructions caused by massive floods and inflation have worn out the efforts of farmers. They are finding other means to earn a living by selling agricultural lands to housing schemes and international corporations. The farmers cannot afford government-subsided machinery, medications, and fertilizers. Moreover, they do not generate enough income which could be spent on land preparation and water utilities. Political and economic factors also play a role in driving these farmers out of business. As a result, some farmers also rent out acres of land with minimal annual investments in return. Therefore, millions of acres of farmlands are available for sale or rent at present.
Is it a Good Idea to Invest in Agricultural Farmlands?
Agricultural farmlands have so much potential to generate income for prospective investors if they invest wisely. One way of generating income is to rent out the land on lease to someone which will help the investor earn a fixed amount only. On the other hand, the investor can use the resources and workforce to cultivate the owned land. As a result, all of the generated income will be directed towards the investor instead of a fixed amount. Some of the benefits of investing in agricultural farmlands are as follows:
Increase in Asset Value
The subsiding of stock prices and mounting inflation have increased the value of farmlands in the country. Investments in agricultural farmlands provide stable returns and appreciate the value of property over long periods. Moreover, the insufficient food supply and land scarcity in the country amid the monsoon floods have increased the value and significance of the land as well.
Availability of Developed Farmhouses
In the past agricultural farmlands were located far away from the mainland making commuting and availability of other services difficult for the owners. However, reputable housing schemes and real estate agencies have developed farmhouses within the communities of metropolitan cities which can be acquired by online real estate services as well. The investors can enjoy and live in the farmhouse while being minutes away from all the facilities of a city.
Benefits from Growing Produce and Breeding Livestock
Acres of fertile land are easily available for sale in Pakistan which can be used to grow abundant organic produce and breeding of livestock. Selling these products in the highly inflated market will generate passive income with great benefits. In addition to that, investors can hire property managers, a workforce, or farmers to turn the land into a commercial establishment as well.
Renting out farmland for picnics, recreational activities, weddings and parties can help the owner earn passive income. The majority of the people who own developed farmlands are involved in such businesses as it is in trend. With proper charges, property marketing strategies, and communication with clients, the farmlands can act as a great source of secondary income.
In Pakistan, there are special tax breaks for the owners of agricultural farmlands and growers of produce. The Federal Board of Revenue (FBR) has made special and specific exemptions on agricultural income or the sales earned through selling agricultural produce.
The value of farmlands appreciates steadily over time and it is not disturbed much by the economic volatility. The housing market and stock may crash due to the changing trends of the market but farmlands ensure stable growth and return on investments. The reason for this is people will need food production even if commercial or housing real estate is slow. Therefore, it is a stable investment.
Source of Multiple Revenues
Agricultural farmlands provide multiple sources which can act as income generators. The investor can sell some of the land to earn profit or generate revenue from produce, livestock, or rent the land out. Moreover, the investor can also build commercialized establishments on the land and reap its benefits.
Challenges in Agricultural Farmland Investment
Requires Knowledge and Experience
Buying, investing, and selling agricultural farmland could be a tedious task. It requires immense knowledge about the national and local land laws, terminologies, and experience of the agriculture sector before making any decisions. Making blind investments may not generate the revenue which the investor has anticipated.
The majority of the population relies on a single water source, the Indus River. The severe climate change has lessened the water flow leading to water scarcity. The growing agriculture and industrial areas in Pakistan are facing water shortage issues as a result. Moreover, 80% of agriculture in Pakistan is dependent on rainfall therefore climate changes will affect the yield in the long run (Fayaz, 2021).
Lack of Agricultural Reforms and Regulatory Authorities
All the developments, policy formations, and initiatives taken by the government regarding agricultural land reforms have been ineffective due to failure in implementation and monitoring strategies. Moreover, this sector faces the issues of corruption as well in the form of overloading fees which raises the investment costs of farmers. There is no regulatory authority that can play the watchdog role.
Lack of Smart Agriculture Culture
With the ongoing climate changes, the use of technology and the establishment of digital camps in agricultural lands is the only way to keep a check on current weather conditions, smart fertilizer applications, and irrigation systems. However, the government does not provide such resources for the agricultural sector. There is a lack of intelligent and smart agriculture culture which can improve the efficiency of these lands.
Mistakes to Avoid While Investing in Agricultural Farmland
A large number of court cases in Pakistan are related to land. Therefore, the investor should check the ownership and land titles of the farmland before making investments. These services are provided by online real estate corporations and regulatory authorities as well.
The investor should conduct extensive research about the quality of land soil, its value, and other such features. Physical verification of the property and looking into the details are important.
Before investing in the farmlands, the investor should learn about all the existing land laws and regulations. It will aid the investor in the decision-making process.
The agricultural sector of Pakistan has great potential to thrive in the country. It provides lucrative opportunities for investors to generate long-term wealth. However, investors should have a clear financial plan in mind before making hasty decisions. The return on investments from agricultural farmlands may not be as promising as believed. It is suitable for high-income investors who can afford expensive agricultural technologies and a large workforce. Salaried or self-employed investors may find it difficult and tiresome to establish and grow a farmland. Therefore, the investor should look into all the prospects and challenges of agricultural farmland investments before making any decisions.