The villagers have since vowed to continue protesting until they receive more funds from the state, which sold the land to the star's charity on a 99-year term.
"The government short-changed us on the land. It gave us peanuts. I should have pocketed 200,000 kwacha (1,428 dollars), instead I received 50,000 kwacha (357 dollars)," Milosi Jere, one the villagers, told AFP.
"We will continue to protest until we get ... honest dues. We are not against the Madonna, but the government for cheating us on the value of the land," said Jere, speaking from Chinkota village on the outskirts of Lilongwe.
Jere accused the district commissioner of mismanaging the payments to some 140 villagers for the land where they eked out a subsistence living.
"That piece of land gave me food to feed my children," Jere said.
Lilongwe district commissioner Charles Kalemba told a local newspaper on Thursday that his office paid about 70 million kwacha to the villagers for their "livelihood, and not as compensation".
He said the land was "government land because it falls under Lilongwe city" but the villagers say their families have lived on the land for 100 years.
"We are against the government for cheating on us. We like what Madonna is doing for us and this country," said another villager Panji Phiri.
Madonna's charity Raising Malawi said it spent 70 million kwacha on the land.
Madonna broke the ground last week to signal the construction of the 500 bed academy, which will accommodate girls from "impoverished backgrounds" to train as future leaders.
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