CORPORATE PROPERTY OWNERSHIP IN INDIA

CORPORATE PROPERTY OWNERSHIP IN INDIA

Saturday Brainstorming Thought (305) 12/12/2025

By:-Er. Avinash Kulkarni
9822011051

Chartered Engineer, Govt Regd Valuer, IBBI Regd Valuer,

Rera Certified Consultant, Black Money Act Regd Valuer

Corporate Property Ownership in India allows both Indian and Foreign companies to acquire real estate, but with specific rules

Indian firms can buy for business/rental use

Foreign companies usually need an established presence (branch/subsidiary) and must comply with FEMA/RBI, often for essential business purposes, with reporting requirements

Corporate Property Ownership for Indian Companies

1) Permitted Use

Can purchase residential/commercial property for employee housing, rental income or business operations

2) Benefits

Tax advantages, mortgage interest savings and flexibility in tax management

Corporate Property Ownership for Foreign Companies

1) Establish Presence

Must set up a branch, liaison or subsidiary office in India

2) Purpose

Property acquisition is usually restricted to activities essential for their established business

3) Regulations

Governed by Foreign Exchange Management Act (FEMA) and requires reporting to Reserve Bank of India (RBI)

Key Legal & Structural Aspects

1) FEMA Compliance

Crucial for foreign entities, often requiring RBI approval and adherence to specific timelines for transactions

2) Legal Structures

Can be structured through entities like Limited Liability Partnership (LLPs) or companies, especially for shared ownership models

3) Documentation

Essential documents include the Title Deed (ownership proof), Sale Deed (Transfer Proof), Encumbrance Certificate (no dues) and Mutation Certificate (updated municipal records)

Corporate Property Ownership Emerging Models

1) Fractional Ownership

Dividing an asset into portions, allowing multiple investors (or companies) to buy shares

2) Co-Ownership

Multiple entities forming a new company (like an LLP) to jointly own and manage a property

Important Considerations

1) Clear Title

Verify past ownership, check for mortgages/disputes and get an Encumbrance Certificate

2) Location

Properties within municipal limits are generally preferred

3) Compliance

Ensure all structures and transactions comply with Indian law, including the Companies Act and Income Tax Act

Key Regulations and Types of Ownership

1) Permitted Property Types

Corporations, including those with foreign direct investment (FDI), can purchase and own residential and commercial properties, provided the acquisition aligns with permitted activities such as the development of townships, construction of residential/commercial premises and building of roads, bridges, hotels or educational institutions

2) Prohibited Property Types

The direct purchase of Agricultural land, plantation properties and farmhouses by corporations (both domestic and foreign) is generally prohibited

This is intended to prevent speculative investment in farmland and protect agrarian economies

Foreign Direct Investment (FDI) Rules

1) Automatic Route

Up to 100% FDI is permitted under the automatic route for construction – development projects, townships and the operation and management of completed commercial projects like malls and business centers

2) Government Approval

Prior government approval is required for investments in sensitive sectors or involving land near border areas

Real Estate Business Restrictions

FDI is not allowed in companies engaged in the real estate business which is defined as dealing in land for Profit

This definition, however, specifically excludes the development of commercial/residential premises, townships and infrastructure projects

4) Reporting

All foreign property transactions must be reported to the RBI within 90 days

State Specific Laws

Land acquisition and ownership laws can vary by state in India

Companies must ensure compliance with both central (FEMA, RERA) and state specific regulations, which might require obtaining specific permissions such as converting agricultural land for Non Agricultural use

Investment Structures

Foreign corporations often invest via Indian Subsidiaries or Joint Ventures

A common investment route for both domestic and foreign investors is through government regulated structures like Small and Medium Real Estate Investment Trusts (SM REITs) or Real Estate Investment Trusts (REITs), which pool funds for investment in income generating commercial properties

Summary of Corporate Property Ownership

1) Allowed

Commercial real estate, residential premises, industrial parks, hotels, hospitals and infrastructure projects

2) Prohibited

Agricultural land, Plantation properties, farmhouses and peculative land trading

3) Regulation

Governed by FEMA, DPIIT policies, RERA and state specific land laws

4) Foreign Investment

100% FDI allowed in permitted construction development under the automatic route

Definition of Corporate Property Ownership

A corporate owing property as a separate legal entity, distinct from its owners (shareholders)

Importance of Corporate Property Ownership