Home ／ Insights on entering the Indian market
2026.03.26
India's real estate market continues to draw international attention as one of the world's leading growth markets. Private equity (PE) investment reached 6.7 billion dollars in 2025, a 59% increase year over year. Foreign investors accounted for 76% of the total, with the office segment capturing the largest share at 2.4 billion dollars. According to Savills India's forecast, investment of 6.5-7.5 billion dollars is expected in 2026 as well, with continued capital inflows across a wide range of segments including data centers and premium housing.
Particularly notable is the rapid growth of the industrial land and logistics warehouse segment. As supply chains diversify, global companies, including Japanese companies pursuing a shift of manufacturing bases away from China (a "China plus one" strategy), are accelerating efforts to secure production bases in India. Demand for organized warehousing is also surging, with the expansion of e-commerce driving investment in logistics infrastructure. This structural increase in demand is a factor underpinning India's real estate and industrial land market over the long term.
When foreign companies acquire real estate in India, it is essential to correctly understand the regulatory framework based on foreign direct investment (FDI) policy. India's FDI policy divides each sector into the automatic route (no prior approval needed) and the government approval route (prior approval required), and real estate follows this same framework.
Development projects for commercial and industrial real estate are permitted 100% foreign capital under the automatic route. Specifically, this covers township development, construction of residential and commercial facilities, infrastructure such as roads and bridges, hotels and resorts, hospitals, educational institutions, recreational facilities, and city- or regional-level infrastructure development. Investment in real estate investment trusts (REITs) is also permitted under the automatic route, and is increasingly used as a means of indirect real estate investment.
On the other hand, real estate trading business (buying and selling property for resale) and direct acquisition of agricultural land, plantation land, or farmhouses are explicitly prohibited. This prohibition on "real estate trading business" is a regulation intended to prevent speculative property trading and is clearly distinguished from acquiring real estate for one's own business use. Trading in transferable development rights (TDR) is also included among prohibited activities.
FDI investment in construction development projects is subject to a 3-year lock-in period from the date each investment tranche is paid in. Withdrawal of investment (recovery of funds) is, in principle, not permitted during this period. However, after project completion or after the lock-in period has elapsed, exiting the investment and repatriating funds becomes possible.
Since Press Note 3 of 2020, investment from countries sharing a land border with India (including China, Hong Kong, and Macau, as well as Pakistan, Bangladesh, Nepal, Bhutan, Myanmar, and Afghanistan) has, in principle, been subject to the government approval route. Japanese companies are not subject to this restriction and can invest under the automatic route.
That said, the regulations are being eased. In January 2025, an exception was added for multilateral banks and funds in which India is a member, and further, Press Note 2 (2026), announced on March 15, 2026, took effect on May 2 of the same year. As a result, beneficial ownership that does not involve voting rights or substantive control, of 10% or less, can now be invested under the automatic route, and even in certain manufacturing fields such as electronic components and capital goods, where government approval is required, expedited processing within 60 days has been introduced.
That said, government approval is still required if capital from these countries exceeds 10% in a joint venture partner or the capital structure, or if it involves control. A careful review of the ownership structure remains essential.
India market entry planning: Japanese companies need to understand that real estate acquisition options vary greatly depending on the mode of entry.
A local subsidiary established in India is treated as an Indian company, giving it the most flexible options regarding real estate acquisition and ownership. It can purchase commercial and industrial real estate, enter long-term lease agreements, and acquire land (other than agricultural land). For companies aiming to enter through manufacturing, establishing a local subsidiary is the most common route.
Here, treatment differs between branch offices and liaison offices. A branch office is permitted to acquire (purchase) real estate necessary for its own business activities. There is an obligation to report the acquisition to the RBI in the prescribed format within 90 days. On the other hand, a liaison office is not permitted to purchase real estate and is limited to lease agreements of up to 5 years. Because its scope of activity is limited to information gathering and liaison work, renting office space is the main option.
Note that separate prior approval from the RBI is required when entities from Pakistan, Bangladesh, Sri Lanka, Afghanistan, Iran, Nepal, Bhutan, China, Hong Kong, or Macau acquire real estate as a branch or similar entity.
A project office set up to carry out a specific project is, like a branch office, permitted to acquire real estate necessary to carry out the project (reporting to the RBI within 90 days of acquisition is required). Leasing is of course also possible. This is often used by companies participating in construction projects or infrastructure development, and it is assumed the office will be closed once the project is complete.
For Japanese companies considering entering India through manufacturing, securing factory land is one of the most critical issues. There are multiple routes for acquiring factory land in India, each with its own benefits and risks.
Special Economic Zones (SEZs) are an option that combines ready-made infrastructure with customs advantages. However, the tax treatment has changed significantly from what was once commonly described, so it's necessary to reset your assumptions.
The commonly cited income tax exemption (100% for the first 5 years, 50% for the next 5 years, and 50% of reinvested profit for a further 5 years on export income) is based on Section 10AA of the Income Tax Act. This benefit comes with a deadline: it does not apply to units that began manufacturing, production, or service provision on or after April 1, 2020. The same provision has been carried over into the new Income-tax Act, 2025, which takes effect in April 2026, but the deadline itself has not been extended. Companies entering now cannot count on this exemption, so it should be excluded as a factor in site selection. The exemption from Minimum Alternate Tax (MAT) was also withdrawn as of April 1, 2012.
The benefits that still remain are that imports and domestic procurement of goods used for development, operation, and maintenance are duty-free, that supplies to SEZs are treated as zero-rated under the GST system, and that central and state approvals are processed through a single window. On the other hand, companies within an SEZ are obligated to achieve positive net foreign exchange earnings (NFE) cumulatively over the five years from the start of operations. It makes more practical sense to base your decision on customs convenience, infrastructure, and export-ratio requirements rather than on income tax benefits. Industrial parks operated by each state's Industrial Development Corporation (SIDC) are also a common option, offering land with basic infrastructure (roads, electricity, water and sewage) at relatively reasonable prices.
日系企業が集積するエリアでの用地取得は、サプライチェーン構築やナレッジ共有の面でメリットがあります。グジャラート州マンダル・ベチャラジSIR内の日本企業専用区、ラジャスタン州ニムラナの日本企業専用区（Neemrana Japanese Zone、RIICOが整備）、タミルナドゥ州のSIPCOT工業団地などが代表的です。Tier 2 cities Industrial parks in these surrounding areas often have lower land costs compared with major metropolitan areas, and can also be advantageous for securing labor.
NIMZs are large-scale integrated industrial townships established under the National Manufacturing Policy (NMP), equipped with state-of-the-art infrastructure, zoning-based land use, clean energy technology, social infrastructure, and skill development facilities. Prakasam (Andhra Pradesh), Medak (Telangana), and Kalinganagar (Odisha) have already received final approval, and NIMZs have also been approved in Nagpur, Tumakuru, Chittoor, and elsewhere. The Delhi-Mumbai Industrial Corridor (DMIC) is a project based on a memorandum between the Japanese and Indian governments, making it a particularly compatible investment destination for Japanese companies.
The Real Estate (Regulation and Development) Act (RERA), which took effect in 2016, has significantly increased transparency in India's real estate market. All construction projects exceeding 500 square meters or containing 8 or more units are required to register with each state's RERA authority.
An amendment introduced in 2025, sometimes called RERA 2.0, brought in stricter compliance standards. Specifically, this includes strengthening the requirement to deposit 70% of funds collected from buyers into a dedicated escrow account, introducing third-party audits, and mandating regular reporting on the use of funds. Gujarat RERA (GujRERA), for example, has required the opening of three separate bank accounts for each registered project since January 2025, reflecting a broader tightening of fund management. These stricter regulations are also a positive factor that increases investment safety for foreign companies.
Land acquisition in India carries several risks unique to the country that differ from Japan. Understanding these in advance and taking appropriate countermeasures is key to success.
Verifying land ownership in India is the single most important item of due diligence. Complex inheritance relationships, the existence of undivided Hindu Undivided Family property, the custom of oral transactions, and incomplete registration records are the main causes of ownership disputes. A title search covering more than 30 years of ownership history is recommended.
The Registration Bill 2025, submitted in 2025, is a complete overhaul of the old Registration Act enacted in 1908. Its main reforms include completing real estate registration procedures fully online, identity verification using Aadhaar authentication (with alternative verification methods also provided for those without Aadhaar), expanding the scope of documents subject to registration (including sale agreements, sale deeds, powers of attorney, and equitable mortgage deeds), and mandating that registration procedures be completed within 7 business days. This reform significantly improves the transparency and safety of real estate transactions conducted remotely, particularly for NRIs (non-resident Indians) and foreign companies.
Building a factory requires obtaining an Environmental Impact Assessment (EIA), permission for a land-use change (converting agricultural land to industrial land), and various environment-related clearances. These procedures can take anywhere from several months to more than a year, so the project schedule needs to allow sufficient buffer time.
Where businesses go wrong in India To avoid these risks, the following practical measures are recommended: conducting a comprehensive title search through a reliable Indian law firm, physical verification of the land by a surveyor, confirming the land-use plan with the local government, an advance investigation of environmental clearances, and cultural gaps engaging a local advisor to fill in gaps in local knowledge.
India's real estate market varies greatly by region in its characteristics. Selecting the optimal location according to your purpose for entering the market is important.
Delhi NCR (including Noida and Gurugram) is the center of politics and administration, and many Japanese companies have set up their headquarters functions there. Mumbai is the financial center, with persistent demand for premium office space, though land costs are among the highest in India. Bengaluru, as a hub for IT and startups, has strong office demand from technology companies. Chennai and Pune are seeing growing concentration in the automotive industry and are gaining popularity as manufacturing bases. middle-class With the expansion of the middle class, demand for commercial and industrial real estate is also increasing in Tier 2 cities (such as Ahmedabad, Hyderabad, and Kochi).
Foreign capital is permitted under the automatic route for commercial and industrial real estate development projects, covering things like township development, commercial facilities, hotels, and hospitals. On the other hand, real estate trading for resale and direct acquisition of agricultural or plantation land are prohibited. This prohibition is meant to prevent speculative trading and is distinct from acquiring real estate for one's own business use.
A local subsidiary incorporated in India is treated as an Indian company, giving it the most flexible options, such as acquiring land (excluding agricultural land) or entering long-term leases, and this route is common for manufacturing businesses. Branch offices and project offices, meanwhile, can acquire real estate needed for their business (with a report to the RBI required within 90 days of acquisition), while liaison offices are not permitted to purchase property and are limited to leases of up to five years.
Options include Special Economic Zones (SEZs), which offer benefits for export-oriented companies, and ready-made industrial parks operated by each state's Industrial Development Corporation. Mandal in Gujarat and Neemrana in Rajasthan have industrial parks dedicated to Japanese companies, and the Delhi-Mumbai Industrial Corridor, being based on a framework between the Japanese and Indian governments, is considered a particularly compatible investment destination for Japanese companies.
The most important is ownership risk: complex inheritance relationships, the custom of oral transactions, and incomplete registration records are causes of ownership disputes. A title search investigating past ownership history is recommended. Building a factory also requires various clearances, such as an environmental impact assessment and permission to convert agricultural land to industrial use, which can take time, so the schedule needs sufficient buffer.
The Real Estate (Regulation and Development) Act (RERA) has increased market transparency, and measures to strengthen the protection of buyers' funds are advancing. Reforms are also underway that include moving the registration system online and shortening procedure times, improving the transparency and safety of remote real estate transactions. These stricter regulations are a positive factor that increases investment safety for foreign companies.
It's important to first choose the optimal mode of entry based on your purpose and business plan; for manufacturing, establishing a local subsidiary and using an SEZ or industrial park is common. Next, thoroughly conduct due diligence, including a comprehensive title search through a reliable local law firm, physical verification, and confirmation of the land-use plan and environmental clearances. Because the relevant laws are amended frequently, an ongoing relationship with a local advisor is essential.
Succeeding in acquiring real estate and factory land in India requires a long-term perspective and a strategy grounded in local realities. First, it's important to choose the optimal mode of entry based on your purpose and business plan. For manufacturing, establishing a local subsidiary and using an SEZ or industrial park is the common pattern; for services, establishing a branch office and leasing commercial space is common.
Second is thorough due diligence. Companies need to comprehensively carry out verification of land ownership, confirmation of environmental regulations, investigation of infrastructure development, and analysis of the local labor market. Third is ongoing adaptation to a changing regulatory environment. Because India's real estate-related laws are amended frequently, building an ongoing relationship with local legal and tax advisors is essential. localization From a risk-management standpoint as well, collaborating with a partner well versed in local business practices and the regulatory environment greatly increases the probability of success in real estate investment in India.
MORE
Can Japanese products be placed on India's quick commerce?Will supermarkets in India stock Japanese products?Is wholesaling to India's ubiquitous kirana shops possible?Which malls in India are UNIQLO and MUJI in?Where does sales channel development in India start? How distribution works and how to choose a channelOrders placed in India do not arrive | How to find suppliers of ingredients and materials, and what to do about itSOJAPAN
We support Japanese companies entering India, from market research through local partner development, test sales, and import.