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Agrarian land and its relevance in the development of real estate projects in Mexico
By Ángel Domínguez de Pedro and Fernando Medina Luna
With a total land area of 196,437,500 hectares, Mexico is one of the largest land surface countries in the world, representing an important target for private investment and development opportunities. Real estate is one of the highest areas of private investment.
Agrarian property represents 51% of the total Mexican territorial surface. This means that at least half of the anticipated investment will necessarily be on agrarian property or, at least, have an agrarian background.
What is agrarian property?
Agrarian property is social land owned by agrarian communities made up mostly of farmers or natives. The land is governed by and ruled by agrarian regulations. Ownership has mainly resulted from the endowment or ownership recognition by the federal government.
The National Agrarian Registry has shown that 70% of the biodiversity and forests, two thirds of the water resources and 60% of the Mexican littorals are located within agrarian property. The Registry also shows that within agrarian property, large, privately funded, production projects are taking place.
The laws and regulations governing development of agrarian land are complex. Given the protectionist nature of these regulations in favor of social land holders, adequate attention and legal knowledge of the legislation is indispensable. The agrarian regulations contemplate two regimes: Ejidos and Agrarian Communities, both with a similar integration but with specific characteristics and procedures. Both regimes share in common certain features, with the main difference being that Agrarian Communities cannot convert their properties to private property in order to transfer them to individuals which are not part of the corresponding community.
The Agrarian Regulations also provide very strict limitations on dealing with the agrarian land, including prohibitions and regulations on acquiring land in agrarian Ejidos and communities and compulsory procedures to withdraw a property from the agrarian regime. Noncompliance could lead to acquisitions and disposals being nullified which would have a serious impact on the security of any investment.
Considering the strict regulation concerning agrarian land and due to the expansion and economic, social, and urbanization development within agrarian properties, investors should always be prepared to carry out a thorough due diligence on the properties to prevent any negative impact on private investments.
