Using Agricultural Lands for Non-Agricultural Purposes in Maharashtra – Important 2016 Amendments

2017 brought some very important and progressive changes to the Maharashtra Tenancy and Agricultural Lands Act, 1948 (Act). Two sections (63, and 63-1A) of the Act govern the ability to sell and buy agricultural lands (AL) for non-agricultural (NA) use.

Here is a comparative note on the pre-amendment and post-amendment law under Section 63-1A affecting AL bought for NA bona fide industrial use.

1. Earlier, one could buy AL exceeding 10 Hectares (25 acres, about 101150 square meters) only after getting permission from the Development Commissioner (Industries): this condition now stands deleted. Any quantity of AL located in an agricultural zone can be bought so long as extant law permits its industrial use, or the AL is located within the area taken over by a private developer for development of an Integrated Township Project.
2.  Earlier, once bought, the aggregate period to put the AL to NA use was 15 years from the date of purchase: this aggregate period has now effectively reduced to 10 years (both for the original or subsequent transferee). The land is to be put to the bona fide industrial use within five years of purchase. If that is not done, the Collector may grant an extension of further five years on annual payment of non-utilisation charges of 2% of market value of the property.
3.  Earlier, failure to use the AL for NA purpose within 15 years would entitle the original seller to repurchase it from the defaulting purchaser at the original price: now, at the end of 10 years, the Collector will resume control/possession of the land after giving a month’s notice to the defaulting purchaser, and the land shall be vested in the Government, free from encumbrances. It will then be first offered to the original seller by way of grant, on the same tenure as it was held by him before the sale and at the same price at which the land had been sold by him. If the original seller does not accept this offer and/or make the payment, the land will be auctioned for any use consistent with the extant development plan – and the Collector will then remit to the defaulting purchaser, the price at which it had purchased the land for NA use.
4.  Earlier, if the AL being bought was Occupant Class – II land, proposed to be used for a township project, there was no penalty due for delay in paying to the Government the amounts prescribed in lieu of nazarana (i.e. a charge to use such “restricted user” land): now, delay in paying to the Collector 50% of the purchase price to buy Occupant Class – II AL for use as Integrated Township Project within one month of executing the sale deed will result in 75% of the purchase price or market value, whichever is higher, becoming payable to the Government.
5.  A new sub-section (5) was introduced, which regulates sales/transfers of AL bought for NA use, before the expiry of 10 years and before utilising it for bona fide industrial use. Under this provision, if an NA buyer of AL proposes to sell the AL at any time within the 10 year period, it may do so (after also paying a non-utilisation charge, if the proposed sale is in the five-year extension period) on the following basis:
   1. Such sale/transfer will require prior permission of the Collector;
   2. The period of 10-years from the date of original purchase will also apply to the second transferee;
   3. If the land is to be sold for bona fide industrial use, the transferor will deposit with the Collector, transfer charges @ 25% of the land market value;
   4. If the land is to be sold for any non-agricultural purpose other than the bona fide industrial use (consistent with extant development plans), the transferor will deposit with the Collector, conversion charges equal to 50% of the land market value. If such land is Occupant Class – II, a further amount equal to 48% of the original purchase price will also be deposited in lieu of nazarana.
6.  The definitions of bona fide industrial use and Integrated Township Project were also clarified or substituted pursuant to the amendment.

It is important to note that an aligned amendment has also been made in the Maharashtra Land Revenue Code, 1966 permitting conversion of Class-II occupancy land into Class-I occupancy on paying prescribed conversion premium: i.e. paying a charge to release “restricted user” land (Class II) and classify it as land transferable without any restrictive conditions (Class I).

In our view, these changes will give necessary fillip to purchase and use of AL for industrial and township purposes by serious and interested parties.

[Written by Sandeep Dave and Hiral Mehta]