Why can't farmers freely buy, sell, or lease their land like other property owners?

Imagine you own a house, but the government decides who you may sell it to, restricts whom you may rent it to, and requires multiple approvals before a bank will accept it as collateral. Sounds absurd, yet this is the reality for millions who own agricultural land in India. Agricultural land operates under a regulatory framework fundamentally different from other property. These controls trace back to the land-to-the-tiller reforms of the 1950s and 1960s, when breaking feudal concentration and protecting tenants from eviction were urgent priorities. But what began as protection has calcified into a system that now restricts farmers’ economic freedom and mobility.

Restrictions on buying and selling: Most states cap the amount of agricultural land an individual can own, ranging from 5 to 20 hectares. Many also restrict sales to “non-farmers” or people from outside the state. These rules were meant to prevent land concentration and speculation, but they’ve created new problems. A farmer who wants to consolidate holdings by purchasing a neighbour’s plot may be blocked simply because doing so would breach the ceiling. A farmer who wants to exit agriculture and move to a city cannot easily sell at market value because the pool of eligible buyers is legally restricted. Urban families who inherited agricultural land but cannot farm it are left holding an asset they cannot freely sell or put to productive use.

Leasing restrictions are even more binding. Here’s the paradox: many small farmers would benefit from leasing additional land to reach a viable scale. Many landowners would benefit from leasing out land rather than leaving it fallow. But formal leasing remains rare. Why? Tenancy laws in many states either prohibit leasing or impose restrictions, such as rental caps and the risk of land loss. Landowners fear that if they formally lease their land, they might never get it back. The result? Research by Niti Aayog suggests that up to one-third of India’s farmland is cultivated under informal oral leases, arrangements that have no legal standing. These invisible tenants can’t access institutional credit (they don’t officially farm the land), can’t get crop insurance, and can’t invest confidently in soil improvement because their tenure is insecure.

Why do these restrictions matter? Land that could serve as collateral for credit or as capital for starting a business sits locked, accessible only through complex bureaucratic processes to convert it to non-agricultural use. Farmers who want to expand their holdings cannot. When land can’t be freely bought, sold, or leased, it stops being treated like an asset, and investment in productivity improvements falls.

When we treat farmers as capable decision-makers rather than people who need protection from their own choices, we enable both farming as an enterprise and smooth exits for those who want to leave.