This study was conducted to evaluate the effect of intercropping coconut lands on soil water retention, available water, porosity and their relationship with organic matter contents. The results showed that the water holding capacity and available water increased significantly at both depths (0–20 and 20–40 cm) investigated. The increase in available water was mainly due to increase in field capacity which can be attributed to better soil structural development and stability related to higher organic matter and root activity in intercropping treatments. Bulk density in coconut monoculture plots was as high as 1.72 g cm−3which is restrictive to root growth in these sandy loam soils and decreased in intercropped plots to 1.49 g cm−3facilitating better root penetration and soil aeration. The total porosity and macro-porosity increased significantly with intercropping. The intercropped treatments did not show a significantly higher organic matter content but showed an increasing trend. Clay content of this soil was as low as 8% in the top soil and increased to 17% in the sub soil. At such low clay contents, even a slight increase of organic matter will have a significant effect on soil aggregation and thereby on water retention. The coconut yields of intercropped treatments increased by 5% to 34% over monoculture indicating sustainability of such farming systems under rainfed conditions.