Foreign investors interested in acquiring or developing industrial land in India—the likely context based on your earlier questions—are subject to specific land ownership restrictions under Indian laws and sectoral regulations. These restrictions aim to regulate foreign capital in land-intensive assets while enabling investment in industrial and infrastructure projects. Below are five key categories of restrictions and conditions that apply:
1. Direct Ownership of Agricultural or Plantation Land Is Prohibited
- Foreign nationals and foreign companies are generally not permitted to directly purchase:
- Agricultural land
- Farmhouses
- Plantation property
- Agricultural land
- This restriction applies even if the entity is registered in India but is controlled from abroad.
- Only Indian citizens or entities with Indian ownership can directly own such land, unless special approval is obtained.
2. Industrial Land Can Be Leased, Not Always Owned
- Foreign investors can acquire industrial land on long-term leases (typically 30–99 years) through:
- Industrial Development Corporations (e.g., TIDCO, MIDC, GIDC)
- Special Economic Zones (SEZs)
- Industrial Development Corporations (e.g., TIDCO, MIDC, GIDC)
- Direct freehold ownership is generally restricted or permitted only with:
- Approval from the Reserve Bank of India (RBI)
- Route through an Indian-incorporated subsidiary.
- Approval from the Reserve Bank of India (RBI)
- Lease structures are commonly used to align with Foreign Direct Investment (FDI) policy norms.
3. FDI in Industrial Real Estate Must Follow Sectoral Guidelines
- FDI is allowed up to 100% under the automatic route for:
- Industrial parks
- Manufacturing facilities
- Warehousing and logistics infrastructure
- Industrial parks
- However, FDI in real estate trading or pure land development (i.e., buying and selling land without construction) is prohibited.
- Investors must demonstrate active development (e.g., construction of infrastructure or industrial units) as a condition for land acquisition.
4. Investment Via Indian Entities and SPVs
- Foreign investors typically route land acquisition through Indian subsidiaries or Special Purpose Vehicles (SPVs):
- These entities must be registered under the Companies Act and comply with FDI rules.
- Foreign ownership must be reported to the RBI and recorded with the Department for Promotion of Industry and Internal Trade (DPIIT).
- These entities must be registered under the Companies Act and comply with FDI rules.
- Any investment must align with sectoral caps and conditions, such as lock-in periods or minimum built-up areas.
5. Additional State-Level Restrictions May Apply
- Certain Indian states impose local restrictions on land transactions involving non-residents or foreign entities.
- E.g., restrictions on the purchase of land by non-agriculturists or foreigners in states like Himachal Pradesh, Uttarakhand, or parts of Gujarat.
- E.g., restrictions on the purchase of land by non-agriculturists or foreigners in states like Himachal Pradesh, Uttarakhand, or parts of Gujarat.
- State Industrial Development Corporations may require:
- Board-level approvals
- Local employment or usage commitments
- Performance guarantees tied to industrial activity
- Board-level approvals