An Investigation of the Determinants of Farmland Prices and Implications for Land Use Policy in Central Khyber Pakhtunkhwa, Pakistan

This study examined the determinants of farmland prices in central Khyber Pakhtunkhwa (Pakistan), using land transaction records for 2015-16. Results from Hedonic Pricing analysis show that location, environmental and agricultural characteristics of a farmland determine its price. Residential and commercial encroachment on fertile irrigated farmlands at urban fringe is alarming. More than half of the sampled transacted farmland parcels were used for residential and commercial units’ construction. Farmland potential for commercial or residential use creates a value expectation and it capitalizes into farmland price. The value, however, does not influence farmland rents. For control in loss of fertile agricultural land, the study recommends the imposition of progressive taxes on residential and commercial properties and diversion of funds for development of agricultural infrastructure. Provision of subsidized inputs could help in raising farmer’s return from agriculture and changing their perception in favor of using their lands for crops and livestock production.