To the overseas buyer looking to buy agricultural land, a knowledge and understanding of the restrictions and policy on foreign ownership is crucial.
The policy and regulatory environment for foreign investment of farmland is complex and varies significantly. In some countries, the ownership of agricultural land is prevented on all types of land. In others, there are restrictions on the location, size and types of property that can be owned.
Sometimes there is specific criteria surrounding the skills and character of those who can acquire private ownership of land. Table 4.1 illustrates how the regulatory environment for foreign investment of farmland can differ by selected countries.
In addition, as the interest in foreign ownership of agricultural land increases, the rules can and do change. Lobbying from local people, or a change in government policy can lead to a change in the regulations. For example, a new law recently introduced in Uruguay bans Sovereign Wealth Funds but private investors will not be affected.
Eastern European countries have experienced considerable change in their land market policy. For those countries that joined the EU in 2004, the rules on foreign investment have opened up since 2011. Lithuania, Hungary, Latvia, Slovakia, Estonia and the Czech Republic were granted a seven year transitional period, where they could maintain their existing legislation restricting the acquisition of agricultural land or forest until 2011.
Romania was also granted a seven year transitional period from accession in 2007. However, these restrictions did not fully constrain foreign investment as there were differences within countries in the implementation of this rule. Conversely, in Hungary foreign investment has become more regulated.
Advice should also be sought on the rules surrounding the selling of farmland in different countries, because if restrictions change the demand may be limited. Argentina is an example of where the rules changed, and farmland cannot be sold to overseas investors until the political situation changes.
In some countries the option to lease is possible and this is a realistic and viable investment option.