ED had yesterday arrested Sharma under the Prevention of Money Laundering Act (PMLA).
It had demanded his custody for 14 days, but PMLA court judge A C Joshi granted the agency his custody for seven days.
Sharma was arrested after the Supreme Court vacated an interim stay on his arrest.
The ED lawyer contended that he was not cooperating with the investigators so his custodial interrogation was necessary.
Sharma was summoned to the ED office yesterday to record his statement and later arrested after the central agency claimed he gave "evasive replies" regarding his and his relatives' overseas bank accounts and transactions.
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Sharma sanctioned the allotment in 2004 when he was the collector of Kutch district and chairman of District Land Evaluation and Pricing Committee. The allotment was at a low price and it caused a loss of Rs 1.2 crore to the exchequer, ED has alleged.
In return, he received around Rs 22 lakh in the name of his wife Shyamal P Sharma, it alleged.
Sharma had crossed swords with the Gujarat government when Narendra Modi was the chief minister. He had claimed that he was being victimised by the BJP government for his knowledge of illegal surveillance on a woman by the state government agencies.