Police said they arrested arrested Dayanand following a complaint lodged by one Janardhan Reddy, who accused him of attempting to grab his plot measuring 163 sq yards at Gemini Colony here after taking it on lease.
"The complainant claimed Dayanand tried to encroach upon his plot, which according to him, has a market value of Rs 60 lakh," Musheerabad Inspector Shyamsunder said.
The former Minister's brother was produced before a local court, which sent him in 14-day judicial remand.
CID investigation disclosed that Rao had abused his position as an MLA to "grab" 70 acres of land by allegedly duping the owners of housing plots in Greenfields locality.
The MLA from Secunderabad Cantonment was arrested last month in connection with a dowry harassment case lodged against him by his daughter-in-law Vamsi Priya.
The ruling party legislator was subsequently released after Vamsi Priya withdrew the case.