What should I do if some one built house in our land?

Hi, We have bought land(30*40) 8 to 9 years back. Until now we were thinking about we have our own property which will help for our future. Now we are in a situation either to built home in that land or to sell that land. If we go and see that land now, our neighbour occupied 360sq ft of our land by thinking that is his land and built house in that. Now we have only (21*40) left over. Recently our next to next site was sold for 16 lakhs, according to that for 360 sq ft it costs more than 5 lakhs, now the guy who occupied my land is saying I will give only 2 lakh since I occupied one third of your land. When I bought my land it was 6 lakh so I can pay you only 2 lakh, if u go to court they will not give order for demolish the building so based on govt rate I.e., 200 per sq ft I will pay you 72000 alone... Suggest me what best I can do here. This is the only land my father bought in his entire service. Now he is about to retired and thinking of building house in that land, but people are cheating like this.. Please suggest me what can I do in this?