Foreign Estate Acquiring Real Estate in India

Meaning of Foreign Entities

Meaning of Foreign Entities

Entity means something which have an independent existence. A Foreign entity is an entity that is already formed in another state, country. It means any company incorporated outside India which:

  1. has a place of business in India whether by himself or through an agent physically or through electronic mode
  2. conducts any business activity in India in any other manner

Meaning of Real Estate

Meaning of Foreign Entities 1

Real estate is the property made up of land and the buildings on it, as well as the natural resources of the land including farmed crops and livestock, immovable property of this nature.

Rules of Companies Act

  1. Under the Companies Act 2013, A foreign entity can set up as a subsidiary, or branch office, liaison office or as a limited liability partnership.
  2. A foreign entity is not allowed to acquire agricultural land for business purpose.

Investment of a foreigner in India

A foreigner can invest in India, but there are some prohibited sectors and activities in which a non resident of India cannot invest.

Foreign Direct Investment

Meaning of Foreign Entities 2

When any business from one nation invests in another business belonging to different country, it is known as foreign direct investment.

Types of Foreign Direct Investment

IMG 20200802 182534
  • Horizontal Foreign Direct Investment- It means when a business invests in a foreign company that produces similar goods.
  • Vertical Foreign Direct Investment- It means when a business invests in a foreign company that supply or sell, but not directly in the same industry.
  • Conglomerate Foreign Direct Investment- It means when a business invests in a foreign company which belongs to a completely different industry.

Any Indian company can receive FDI (Foreign direct investment ) through

  1. Automatic role
  2. Government route
  3. Foreign portfolio investment
  4. FII
  5. NRI & PIO
  6. QFI
  7. Foreign venture capital investors

Important points to keep in mind for foreign entities acquiring real estate in India

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  • It is preferable for a foreign company to seek help from a real estate broker for finding a suitable property for its business requirements.
  • LOI (Letter of Intent) is the initial document displaying the basic terms and conditions which is agreed between the parties. In some cities in India, a payment of token amount is done on execution of LOI. This practice make this document a binding agreement.
  • While searching for a property, utmost care and attention to be paid regarding the title, usage, encumbrances and litigation of the property and proper investigation to be done. Therefore, it is advisable to consult an attorney with proper knowledge in this area.
  • If there is requirement of some initial conditions to be fulfilled, the company usually enter into an agreement to lease or sell before executing the main agreement. But it is not compulsory. A detailed agreement to sell or lease forms the basis of the final transaction document.
  • After completing all the conditions regarding the lease or sale agreement, the parties execute the final agreement as the deed of lease or
  • After all these steps, the deed of lease is submitted to the Registrar of Assurances for registration. A compulsorily registrable document , if not registered, confers no right and cannot be produced as a proof to show the transfer of immovable property or any of its terms during any dispute.  

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