In a unique initiative, IIM-Ahmedabad (IIM-A) has partnered with an electronic market place for agricultural land, SFarms India, to develop an agricultural land price index based on sales and purchases made on the platform.
The index was designed to record and present ‘quality controlled’ data on farmland prices in the country.
The Misra Center for Financial Markets and Economics of IIM-A, under which this index is launched, will host it on its official website and it will be called IIM-Ahmedabad SFarmsIndia Land Price Index (ISALPI).
“The index will track price movements in the market (SfarmsIndia) and come up with a composite pricing mechanism on a monthly basis, which will be updated twice a year,” said Prashant Das, ISALPI Project Manager and Associate Professor real estate financing. at IIM-A, says Trade standard.
The index will have no correlation to circle rates but will use prices quoted in the online market as a base value for research.
SFarms India is a farmland discovery platform, with over 25,000 registered buyers and sellers. The platform has more than 7,000 land listings, which are growing at around 15% per month, according to its website.
“SFarms India is like No-broker.com but only for farmland, and we will use the prices listed there to construct the index,” a source said.
According to the IIM-A, the index will be a reliable source for comparing land prices in rural and semi-urban areas and will help signal the conversion of agricultural land into real estate.
Given the complexity of constructing an index for land parcels due to price differences, the index has been prepared to account for disparities and ensure accuracy. While ISALPI has started on a pilot basis in Andhra Pradesh, Karnataka, Maharashtra, Tamil Nadu, Telangana and Uttar Pradesh, more data from other states in India are expected.
With more data, the index should offer a better representation of the national context and a more granular index at the regional level. In addition, the index will benefit stakeholders from all walks of life, including policy makers, local governments, environmentalists, investors, property developers and financiers.
“The index can be used by local governments to compensate people who lose land to highway expansion,” IIM-A said.
Vinayak Chatterjee, chairman of the Confederation of Indian Industry’s mission on infrastructure, trade and investment, told Business Standard: “It looks like a promising concept as the starting point for any discussion on projects of infrastructure is the price of land and if anyone can tell me precisely what the price of land could be in the area where someone is planning to set up a project compared to other places, this will be of great help.
IIM-A Director Errol D’Souza said, “Now is the right time to launch such an index in India. With ISALPI, we hope to create better data sources for all stakeholders. Das said investors could use index information to assess risk and returns in the past and use those metrics to decide their investment positions.