How Does Land Banking Work In India’s Real Estate Industry?

Land Banking Work: We hear from an expert on how land banking — the process of combining many parcels of land for future sale or development – affects India’s real estate market and the benefits it provides to developers and land owners.


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What exactly is land banking, and how does the land banking industry operate?

The practise of pooling parcels or blocks of land at current market prices or lower for future sale or development is known as land banking. A land aggregator collects land by tracking geographical and topological areas that are ripe for investment based on social infrastructure and demographic characteristics. In general, the land is sent to the aggregator in an unprepared state, after which he compiles the title reports, property boundaries, zone rules, conversions, registrations, permissions, and sanctions, and the land is ready for sale or development.

Land aggregators acquire land, wait for it to rise in value, and then sell it to developers, investors, and other interested parties for a large profit.


Companies that participate in land banking

Federal, state, and municipal governments:

Land banking is used by government agencies to promote long-term civic planning or future economic growth. Municipalities acquire and hold property for new roads, metro stations, hospitals, schools, parks, or economic or residential development endeavours.



A city’s master plan, which defines the infrastructure that is planned for an area, may be used to influence land acquisition planning. For long-term commercial advantages, aggregators can acquire and retain undeveloped or pre-developed property lots that are predicted to improve in market value.


Universities and non-profit organisations:

Universities and non-profit organisations buy land in the public interest for future development and/or expansion.



Having property, particularly land, gives them a sense of security. Individuals can utilise land to develop money for their retirement plans, to pay for their children’s education, or to leave a legacy.


In India's real estate industry, how does land banking work?


Models of land banking in India


Model of buying and selling:

In this model, the land aggregator will purchase land from the primary landowner and sell it to a third party.

Joint development model:

This is a popular development model used by the majority of landowners in which the landowner and developer pool their resources and efforts. The landowner provides his property to the joint development model, while the developer is responsible for development.

Land leasing model:

This model is commonly used for long-term leases of property, in which landowners offer the land without any development. The leasing approach is less expensive than the purchasing and selling paradigm for mobilising land. In this case, the land aggregator operates as a go-between for land owners and a third party, processing leasing contracts, providing guarantees to the procedure, and processing land mobilisation.


Key considerations influencing land banking location

  • Land: Ideally, the land should be stable and useable.
  • The land’s title should be clear and marketable.
  • Connectivity: The land should be well-connected by road, rail, sea, and air (both now and in the future).
  • Social infrastructure: Nearby public infrastructure should include health, education, housing, transportation, and civic amenities.
  • Facilities: The site should have easy access to general amenities (both existing and prospective), such as water and electricity.
  • Existing (or prospective) schools and universities are examples of educational institutes.
  • Growth factors: Consistent with demographic, geographic, civic, and industrial expansion.


In addition to the aforementioned variables, the surrounding commercial and residential growth is a crucial element in land banking.


Land banking stages

Underdeveloped/in the early stages:

Aggregators are interested in all types of land, including farmland, agricultural property, and non-converted land. Land does not see a significant boost in value until it is aligned with the development plan.


Pre-developed/growth phase:

Once the land and its surrounding regions begin to develop with social infrastructure, the value of the land begins to rise substantially.


Developed/matured phase: Land is turned into a residential or commercial property, and its value gradually rises.

The full potential of land banking may be realised only if the land is acquired in its underdeveloped/early stage. Patience is required for land banking to operate. Due of the long-term nature of the industry, most investors overlook land banking as an investment.


The advantages of land banking for both buyers and sellers

Land Banking Work: Buyer Advantages

Appreciation in land value: Land is one of the few things that increases in value over time. As a result, purchasing land with great development potential at or near market value provides maximum value delivery to the investor. If the land is acquired when demand is low. which also means a cheaper acquisition price, a significant profit may be gained later when demand is strong.

Value addition:  Value addition to the site is feasible by securing property development permissions and then proceeding with property development over time. The increase in value makes the land more appealing to developers, who may be ready to pay a premium for it. Alternatively, the land banker might seek funding and proceed with property development.


In India's real estate industry, how does land banking work?



Land Banking Work: Seller Advantages

Above-market rates for land:

Land bankers typically purchase lands at rates that are higher than market value and do not provide a large return on investment at the time of acquisition. As a result, the seller receives a higher-than-market price for his or her land.

Land Banking Work: Elimination of risk:

The seller might remove the risk associated with his land if it does not provide a large return on investment owing to its unsuitability for commercial and/or agricultural reasons.


India’s Land Banking Situation

The average amount of land holdings in India, according to the Thomson Reuters Foundation, is 11,500 square metres. With more than two-thirds of owners owning less than 40,000 square metres of cultivable land. Over 56% of rural Indian households do not own land. “Even if the amount of holdings has shrunk over the decades due to indebtedness and inheritance. Demand for land for industrial and development use has increased as the economy has risen.” This has resulted in disagreements between farmers and states. Putting billions of dollars’ worth of projects on hold,” it noted.

Many small land bankers sold their inventory to larger companies following the introduction of demonetisation. The Real Estate (Regulation and Development) Act (RERA). And the Goods and Services Tax (GST). Due to a lack of cash and a lengthy recession in the real estate industry. Many mid and small-sized developers have been obliged to collaborate with major developers to complete projects.


Land Banking Work : The Effects of RERA and GST

Momentum is also rising for the inclusion of real estate inside the scope of GST. With numerous states supporting finance minister Arun Jaitley’s idea that real estate be included in the GST. The GST Council meeting on November 9, 2017. Was unable to agree on a procedure simplification and has postponed the decision until the next meeting. Furthermore, placing real estate under GST would need a constitutional revision. Currently, schedule seven of the constitution includes land and building taxation as part of the state list. Leases of land, building rentals, and EMIs paid for the purchase of under-construction houses have all been subject to GST from July 1, 2017. Any lease, tenancy, easement, or permission to occupy land is regarded as a provision of service and hence falls under the purview of the federal GST (CGST).




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Disclaimer: The views of this expressed above are for informational purposes only based on the industry reports & related news stories. does not guarantee the accuracy of this article, completeness, or reliability of the information & shall not be held responsible for any action taken based on the published information.
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