Top B-school IIM-Ahmedabad and SFarmsIndia launch agri land price index

In a first in the country, the Indian Institute of Management Ahmedabad (IIM-A) on Thursday announced the launch of the IIMA-SFarmsIndia Agri Land Price Index (ISALPI) in collaboration with agri-land marketplace SFarmsIndia.

The index has been designed to record and present ‘quality controlled’ data of prices of agricultural land across the country. The Misra Centre for Financial Markets and Economy at IIMA, under which this index is being launched, will be hosting the index on its official website.

According to IIM-A, the index will act as a reliable source in terms of benchmarking land prices in rural and semi-urban areas and help in signalling potential conversion of agricultural land into real estate.

Given the complexity of developing an index for land parcels due visible price differences in different listings caused by a slew of factors including the market wide supply-demand factors, the ISALPI index has been prepared to address the said disparities and ensure accuracy.

The premier B-school stated that the ISALPI index has been put together using the regression-based hedonic pricing methods.

Citing data, IIM-A director Errol D'Souza said that with just over 200 million hectares, India houses just two per cent of the world’s cropped land; but feeds over 15 per cent of the world’s population.

"Recently, we have witnessed a surge in entrepreneurial interest in Agri land and allied professions: From agricultural engineering to precision farming, from food technology to supply chain management and green energy. We believe it is the right time to launch such an index for India. With ISALPI, we hope to build better data sources for all stakeholders to be able to make informed decisions at national as well as regional levels and support the agribusiness activities," D'Souza added.

While currently ISALPI is based on land listing data from six states including Andhra Pradesh, Karnataka, Maharashtra, Tamil Nadu, Telangana, and Uttar Pradesh, arrival of more data from other states of India is awaited. Going forward, with more data from other states, the index is expected to offer superior representation of the national context as well as offer a more granular index at regional levels.

In addition, the index would benefit stakeholders across the spectrum including policy makers, local governments, environmentalists, investors, real estate developers and financiers. "For instance, the index can be used by local governments to compensate the people who lose land for highway expansion," IIM-A stated.

According to Prashant Das, project lead and associate professor of Real Estate Finance at IIMA, investors could use information in the index to assess the historical risk and return in the past and predict these metrics for the future to decide on their investment positions.

"Fund managers and producers could use this information to broadly benchmark their own performance. Financiers and insurers could use this information to assess the risk in the company related to the asset class reflected in the index. Researchers could use this information to study how economic events and factors are associated with price movements in a specific asset class. Policy makers (e.g., the central bank) may use it to modulate their policies," Das further stated.