NABARD Land Purchase Scheme : Comprehensive Guide 2025

NABARD Land Purchase Scheme : Agriculture remains the backbone of India’s economy, and in 2025, access to agricultural land continues to be one of the most important resources for farmers. However, purchasing agricultural land has always been challenging for small and marginal farmers due to high land prices, limited credit access, lack of collateral, and traditional lending barriers. To resolve this structural gap in farm ownership financing, NABARD introduced supportive refinancing frameworks under the Land Purchase Scheme (LPS). The NABARD Land Purchase Scheme is designed to make land acquisition affordable and accessible for genuine cultivators who wish to buy land for agricultural purposes.

This comprehensive guide explains what NABARD is, how the Land Purchase Scheme works, eligibility, key features such as lower collateral, long repayment periods, and moratorium availability, along with required documents and application procedures. The guide also covers benefits, limitations, and practical considerations for 2025.

What is NABARD ?

The National Bank for Agriculture and Rural Development (NABARD) is India’s apex-level development bank that focuses exclusively on agriculture, rural development, and allied sectors. Established under the NABARD Act of 1981, it became operational in 1982 with the mandate to strengthen the rural credit structure and ensure financial support for agricultural modernization and rural livelihood improvement.

NABARD plays a multi-layered role in rural financial development:

• It refinances banks and cooperative credit structures to ensure the availability of affordable credit for farmers.
• It guides and monitors institutions like State Cooperative Banks, District Cooperative Banks, and Regional Rural Banks.
• It formulates policies and offers financial support for agricultural infrastructure, irrigation, farm mechanization, agro-based industries, and micro entrepreneurship.

Rather than lending directly to individuals in most cases, NABARD functions as a refinancing institution. This means that commercial banks, rural banks, cooperative banks, and Microfinance Institutions lend money to borrowers, and NABARD supports these institutions by refinancing sanctioned agricultural loans. The Land Purchase Scheme (LPS) is one such initiative supported through the refinancing mechanism.

Overview of NABARD Land Purchase Scheme (LPS)

The NABARD Land Purchase Scheme is an initiative that enables eligible farmers—particularly landless farmers, tenant farmers, sharecroppers, or marginal landholders—to purchase agricultural land. This scheme is designed to reduce inequalities in land ownership and to ensure that genuine cultivators receive the opportunity to own agricultural land, improve their income, and expand farming productivity.

The Land Purchase Scheme is not a grant or subsidy-based initiative but a structured institutional credit support system. Under this model, eligible financial institutions extend loans for land purchase, and NABARD refinances a portion of the loan to make agricultural financing viable and affordable.

Objectives of NABARD Land Purchase Scheme

The Land Purchase Scheme was created with the following core objectives:

• To help landless cultivators acquire agricultural land and secure livelihood.
• To assist small and marginal farmers who need to expand their operational land area.
• To support tenant farmers and sharecroppers to transition from temporary cultivation rights to land ownership.
• To promote sustainable agricultural practices by ensuring secure landholding.
• To strengthen farm productivity and income through ownership-based investments.

These objectives collectively support rural empowerment, agricultural asset ownership, and income stability.

Key Features of NABARD Land Purchase Scheme (LPS)

Lower Collateral Requirement

One of the most significant features of the NABARD-supported Land Purchase Scheme is its reduced collateral requirement. Traditional banks require property mortgage or high-value assets to sanction land purchase financing, making it difficult for low-income farmers to qualify. To address this challenge, NABARD’s refinance support encourages banks to allow:

• Collateral-free loans up to a certain limit (depending on eligibility and lending norms).
• Use of the purchased agricultural land itself as primary security.
• Relaxed collateral norms for Self-Help Groups (SHGs), Joint Liability Groups (JLGs), and verified tenant farmers.

This collateral flexibility makes the scheme more accessible to individuals who lack existing secured assets.

Long Repayment Tenure

Long repayment tenure is another major advantage of the NABARD Land Purchase Scheme. Many traditional financing options require short repayment periods of 3–5 years, creating high EMI burdens. Under the NABARD framework, banks are encouraged to offer:

• Repayment periods extending from 7 to 15 years, depending on loan amount and farmer classification.
• Flexible repayment schedules aligned with crop cycles and seasonal income patterns.
• Lower EMI burdens, especially for marginal farmers and first-time landowners.

The extended repayment window ensures that farmers repay loans comfortably without affecting production expenses, family consumption needs, or future investments.

Moratorium (Grace Period)

Another key benefit of the scheme is the moratorium period, also known as the loan grace period. This is a specified time during which the borrower is not required to repay the principal amount. Only interest may be payable depending on the lending institution’s norms, or in some cases the moratorium may be interest-deferred as well.

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The moratorium period helps farmers by providing:

• Time to fully take over the purchased land.
• Time to begin cultivation and earn income before loan repayment begins.
• Flexibility to invest in seeds, irrigation, tools, fencing, and other essential farm inputs without immediate loan pressure.

Depending on lender policy and eligibility, the moratorium can range between 6 months to 24 months.

Eligibility Criteria

Although eligibility rules may differ across lending banks, the general eligibility criteria include:

• The applicant must be a farmer (cultivator) with verifiable farming activity records.
• The applicant may be a landless farm worker, tenant farmer, marginal farmer, or sharecropper.
• The land being purchased must be legal agricultural land eligible for farming.
• The applicant must not be a defaulter with any bank or financial institution.
• Joint applicants may apply under farmer groups such as Joint Liability Groups or Self-Help Groups.

Loan Amount and Financing Structure

The loan amount depends on:

• The cost of agricultural land.
• Stamp duty and registration fees.
• Cost of initial cultivation activities (optional under some plans).

Borrowers may be required to make a margin contribution (typically between 10% and 30%) depending on financial eligibility and bank norms.

Interest Rates

Interest rates are determined by the lending bank. However, because NABARD supports refinancing for LPS loans, interest rates are generally lower and more affordable compared to standard commercial loans.

Interest rates may also be influenced by:

• Credit profile of the borrower.
• Regional agriculture lending guidelines.
• Government directives or priority sector lending norms.

Required Documents

Typical documents required include:

• Identity proof (Aadhar, voter ID, etc.)
• Address proof.
• Land description certificate.
• Sale agreement or proof of intended purchase.
• Income proof or crop income estimation.
• Bank account statement.
• Passport-size photographs.
• Agricultural land ownership proof if expanding an existing holding.

Application Process

1. Visit a NABARD-supported lending bank, such as a Regional Rural Bank, Cooperative Bank, or Public Sector Bank.
2. Submit application form with required documents.
3. The bank verifies eligibility, land valuation, and creditworthiness.
4. Loan sanctioning takes place if documents and verification are satisfactory.
5. After sanction approval, loan disbursement occurs during land registration and purchase stages.

Benefits of NABARD Land Purchase Scheme

• Enables landless and marginal farmers to become landowners.
• Improves long-term agricultural productivity and capacity.
• Offers affordable interest rates compared to informal moneylenders.
• Encourages more responsible agricultural land use and development.
• Provides flexible repayment with moratorium benefits.

Limitations and Considerations

• Approval depends on bank policies and borrower eligibility.
• Land must be legally clear and suitable for cultivation.
• Some states restrict agricultural land purchase by non-farmers.

Conclusion

The NABARD Land Purchase Scheme plays a significant role in promoting equitable land distribution and improving agricultural livelihoods in India.

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Through its unique features such as lower collateral requirements, long repayment tenure, and moratorium periods, the scheme makes it easier for new and marginal farmers to purchase land and begin sustainable farming. As agriculture modernizes and rural credit evolves, NABARD’s Land Purchase Scheme remains a powerful financial tool for empowerment, economic growth, and rural development.