Buying agricultural land is a big step for any farmer, and arranging the funds for it can be confusing. An agriculture land purchase loan helps you finance the cost of the land. Although the process can be straightforward, only selected banks and NBFCs offer this loan. 

This guide covers who qualifies for an agricultural loan and how the entire application process works from start to finish.

What is an Agriculture Land Purchase Loan?

An agriculture land purchase loan is a secured credit facility provided by banks and NBFCs to buy agricultural land for farming purposes. Unlike other loan offers, this product finances only the plot of land. The land being purchased typically serves as the primary collateral. However, some lenders may ask for additional security depending on the amount sanctioned.

This loan is not offered by all banks as a stand-alone product. Most public sector banks have dedicated agriculture land schemes. Private banks tend to redirect borrowers to a Loan Against Property structure. Confirming product availability with the lender is always the right first step.

Who Can Apply for Loan for Farmers?

Eligibility for an agriculture land purchase loan is more selective than you expect. Lenders assess various details before granting a loan. The following categories can generally apply:

• Farmers who already have existing land and want to expand their holdings
• Tenant farmers and sharecroppers who have documented leasing arrangements
• Agricultural labourers with a verified history and verified farming income
• Registered Farmer-Producer Organisations or FPOs
• Joint Liability Groups (JLGs) recognised under NABARD guidelines 

Eligibility Criteria:

The key eligibility requirements to get farm land loans are:

• Age: Between 18 and 65 years
• Nationality: Indian citizens with valid proof of residence
• Land Ownership: Either own or lease agricultural land
• Income Source: Verified income from agricultural activities
• Credit Score: 700+

Loan Amount & Tenure for Farm Land Purchase

The amount sanctioned under loans for farm land purchase depends on various factors such as:

• The market value of the land
• The borrower's repayment capacity
• State land ceiling laws 

Let us take a look at some of the loan options available to you:

Repayment tenures tend to be longer since agricultural income follows seasonal cycles. 

Interest Rates on Agriculture Land Purchase Loans

The rates of a loan to buy agricultural land generally vary by the lender, the loan amount and your credit profile. Let us take a look at the interest rates offered by some popular banks and NBFCs:

Disclaimer: Rates are indicative and subject to change. Verify current rates on the lender's official website or at the nearest branch before applying.

Public sector banks typically offer lower rates for agricultural land schemes. NBFCs charge more, but their documentation process is usually simpler.

Banks and NBFCs Offering Agriculture Land Purchase Loans

Several lenders have dedicated agriculture land purchase loan products, though availability varies significantly between lender types:

Public Sector Banks:

Here are the most popular public sector banks offering agricultural loans:

• State Bank of India
• Bank of Baroda
• Kanara Bank
• Union Bank of India
• Bank of Maharashtra
• Indian Bank

Private Banks:

Here are some of the best private banks that offer loans for farm land purchase:

• HDFC Bank
• ICICI Bank
• Next Federal Bank
• Axis Bank

NBFCs

Before applying for an agricultural land loan, here are some NBFCs you can consider:

• Mahindra Rural Housing Finance 
• Muthoot Finance 
• Tata Capital

Public sector banks follow RBI priority sector lending mandates, which make land loans an institutional obligation. Private banks typically don't have standalone land purchase schemes and usually redirect borrowers towards a Loan Against Property product.

Documents Required for Agriculture Land Purchase Loan

If you have documents ready before approaching a lender, the processing time can be shortened. Here are some documents that you must keep ready:

Identity Proof: 

• Aadhaar card
• PAN card
• Voter ID
• Passport 

Address Proof: 

• Rental Agreement
• Utility Bills

Land Related Documents:

• Khasra/Khatauni or equivalent land revenue records
• The sale deed or purchase agreement of the land being acquired
• Encumbrance certificate 

Income proof: 

• Kisan Credit Card statements
• Seasonal crop income records
• ITR Filings
• Bank account statements (last 6 months)

Some lenders may ask for a field investigation report or a no-objection certificate from the state revenue authority for larger loan amounts. Documentation requirements can also vary by state due to differences in land record systems.

How to Apply for a Loan for Farmers

The application process for an agriculture land purchase loan is a simple process. It is also fairly standardised across lenders. However, processing timelines can differ. Let us take a look at the complete process step-by-step:

Step 1: Choosing the Lender

Identify the right lender by comparing eligibility criteria and interest rates across at least two to three banks or NBFCs before you apply. Not all lenders offer a standalone land purchase product.

Step 2: Confirm Eligibility

Check your eligibility by confirming your personal and income details. Make sure that your credit history meets the lender's stated requirements. Applying without checking first can result in your application getting rejected.

Step 3: Complete Documentation

Collect documents in advance. Make sure that all land records and KYC documents are updated before visiting the branch. Incomplete documentation is the most common cause of processing delays.

Step 4: Submit Loan Application

You can submit the application online or by visiting the branch. Online submission can speed up the initial stages.

Step 5: Wait for Verification

The bank or NBFC might conduct a background verification. A field inspection might also be required. The lender conducts a physical verification of the land being purchased. They may also assess your existing landholding as part of the valuation process.

Step 6: Loan Disbursal

Once verification and valuation are completed, the loan will be sanctioned. You will be required to sign the final loan documents. Read all terms and conditions before signing. After approval, the loan amount is directly disbursed into your bank account.

Benefits of an Agriculture Land Purchase Loan

An agriculture land purchase loan offers practical advantages that other types of loans cannot match. They are:

• Attractive Interest Rates: Banks and NBFCs offer loans with lower interest rates compared to unsecured loans. Sometimes subsidies are also available.
• Flexible Repayment: Repayment options are often customised to align with crop cycles instead of monthly plans.
• Longer Tenures: Agricultural land loans provide longer repayment tenures to ease your burden.
• Support for Other Activities: You can use the funds for land development, irrigation, and you can use the funds to purchase land as well as develop it.
• High Financing Amount: You can get up to 75% of the land's value as a loan.
• Minimal Documentation: The application process is generally streamlined to help farmers easily purchase land for agriculture.
• Government Support and Subsidies: The government provides various schemes and subsidies in order to help farmers access agricultural land loans in India.

Conclusion

Planning to buy agricultural land and need financing? The right lender depends on the value of the land as well as your credit profile. Rates and eligibility can differ between banks and NBFCs. This is why comparing multiple options before applying is always recommended.

At My Mudra, we help you explore secured loan options suited for land-based financing needs. If you already own property and want to use it as collateral for a larger credit amount, our loan against property service connects you with lenders who can structure a product around your existing assets. You can also look at our MSME term loan if your land purchase is part of a broader agricultural enterprise or agri-business plan. Check your eligibility today and take the first step towards owning your land.

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