Can NRIs Buy Agricultural Land in India? Complete Legal Guide

India attracts NRIs who wish to invest in land, build a house, or develop real estate projects.
But FEMA rules strictly regulate what type of property NRIs can purchase, especially agricultural land.

This blog explains:

✔ What NRIs can and cannot buy
✔ Whether they can buy agricultural land
✔ Whether they can convert agricultural land into a residential colony
✔ Rules for buying residential and commercial property
✔ Legal risks in land pooling and colony development

🔹 1. Can NRIs Buy Agricultural Land in India? — NO

According to FEMA (Foreign Exchange Management Act) and RBI guidelines:

❌ NRIs are NOT allowed to purchase agricultural land, plantation land, or farmhouses.

This restriction exists irrespective of:

• Purpose of purchase

• Investment amount

• Country of residence

• Tax status

NRIs cannot directly buy:

• Khet / agricultural land

• Orchards

• Plantation areas

• Farmhouses

✔ The ONLY exceptions where NRIs can hold agricultural land:

1. If they inherit it from parents/grandparents/relatives

2. If they receive it as a gift from a relative (as defined under FEMA)

They STILL cannot buy it.

🔹 2. But Can NRIs Buy Residential & Commercial Property in India? — YES

NRIs are fully permitted to buy:

✔ Residential property

✔ Commercial property
✔ Multiple units (no limit)
✔ Apartments, shops, offices, villas, floors, etc.

They can buy:

• Ready-built property

• Under-construction projects

• Plots for residential/commercial use

• Commercial complexes

• Industrial property (subject to local laws)

✔ HOW NRIs can buy these properties:

Payment must be made through:

• NRE account

• NRO account

• FCNR account

• Banking channels only

Cash purchase is not allowed.

🔹 3. Can NRIs Buy Agricultural Land First and Then Convert It Into a Residential Colony? — NO

Many NRIs think they can buy agricultural land → convert into a colony → develop plots → sell for profit.

❌ This is NOT allowed under FEMA.

NRIs cannot purchase agricultural land even if the intention is later conversion to residential.

Why?

Because the purpose of purchase is irrelevant. FEMA prohibits the acquisition itself.

🔹 4. What If an NRI Forms a Partnership With Indian Citizens to Buy Agricultural Land for Colony Development?

This is a grey area where many real estate agents mislead NRIs.

🔸 Scenario 1:

Indian citizens (non-NRIs) purchase agricultural land in their own names → later convert → pool the land → develop a colony.

Then NRI joins as a financial partner
→ LEGALLY PERMISSIBLE ONLY IF the NRI does not directly acquire the agricultural land.

NRI can:

✔ Become a partner in a development agreement
✔ Invest in a registered partnership firm/company that owns the land
✔ Share profits from development
✔ Receive residential plots/flats after conversion

NRI CANNOT:

❌ Buy agricultural land directly
❌ Register agricultural land in their own name
❌ Be a joint purchaser of farmland
❌ Pay for agricultural land on behalf of Indian citizen owners

🔹 5. Can NRIs Participate in Land Pooling Projects Developing Colonies?

✔ YES — If done correctly

❌ NO — if they attempt to purchase agricultural land

NRIs may participate by:

• Funding the development project

• Entering into a Joint Development Agreement (JDA)

• Entering into a revenue sharing agreement

• Investing in a company/LLP that owns the land (owned by Indian citizens)

✔ After the land is converted to residential use:

NRIs can legally:

• Own residential plots

• Own houses

• Own commercial shops

• Own apartments

There is no restriction on NRIs owning residential or commercial property post-conversion.

🔹 6. Can NRI Buy Plots in a Residential Colony Developed on Converted Agricultural Land?

✔ YES.

Once the land is converted (CLU/NOC obtained) and becomes:

• Residential zone

• Approved colony

• Plotted area

NRIs can buy:

✔ Residential plots
✔ Floors
✔ Houses
✔ Commercial plots in approved areas

This is fully legal under FEMA.

🔹 7. Common Mistakes NRIs Make While Investing in Land in India

❌ Believing they can buy agricultural land “in someone else’s name”

→ Illegal and risky (benami law risk)

❌ Paying money for agricultural land but registering property in relative’s name

→ Benami Prohibition Act violation

❌ Entering verbal land pooling agreements

→ No legal protection

❌ Investing in colony development without:

• CLU approval

• Licence under PAPRA / local development authority

• Proper layout plan

❌ Buying plots in illegal colonies

→ No registry
→ No electricity/water approval
→ Future demolitions

❌ Thinking agricultural land automatically becomes residential

→ Requires strict legal conversion

⭐ Conclusion

✔ NRIs cannot buy agricultural land in India, regardless of intention.
✔ NRIs can inherit or receive agricultural land as gift, and then legally sell it.
✔ NRIs can buy residential and commercial property without restrictions.
✔ NRIs can invest in real estate development projects only if they do not directly purchase agricultural land.
✔ After agricultural land is legally converted into an approved residential colony, NRIs can freely purchase plots or houses.

Understanding these rules protects NRIs from legal violations and unsafe investments.