joehovel 30 March 2015

Foreigner leasing land in andhra pradesh?

Hello everyone!

I just joined the forum and this is my first post.

I hope the following question is in the right forum! If not, please advise if it should be in the business Law forum. If so, perhaps the moderators can move it.

Anyway, I am in the process of forming a new Pvt. Ltd in India and the Ltd wishes to lease some land for horticultural pursuits. Two of the Directors (and shareholders) are Indians (living in Andhra Pradesh) and two will be foreigners living part-time in India and part-time in Germany and Australia respectively.

I have been informed of two different 'Regulations':

1. no land can be leased by a company which has foreigners as members/shareholders at all; and

2. the land reforms and the new Direct Foreign Investment rules allow a 'mixed' company to lease land for horticulture (but apparently not agriculture) from a private landlord.

Which of the two versions is correct?

Obviously I also wish to know where I can find the correct ruling or precendence.

Anyone here know for sure?

Kind Regards,

Joe

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3 Replies

SIVARAMAPRASAD KAPPAGANTU (Retired Manager) 31 March 2015

Dear Mr. Joe,

The guidelines relating to Foreign Direct Investment are issued by Reserve Bank. In terms of the Master Circular on FDI there is a restriction on foreign investment in Agriculture. The relevant portion of the Master Circular of FEMA guidelines is as follows:

Prohibition on foreign investment in India

(i) Foreign investment in any form is prohibited in a company or a partnership firm or a proprietary concern or any entity, whether incorporated or not (such as, Trusts) which is engaged or proposes to engage in the following activities⁴:

(a) Business of chit fund, or

(b) Nidhi company, or

(d) Real estate business, or construction of farm houses, or

(e) Trading in Transferable Development Rights (TDRs).

Full text of the Master Circular is available in the Website of RBI and you may click on the following link:

https://www.rbi.org.in/scripttts/BS_ViewMasCirculardetails.aspx?id=8104

Therefore, when there is a ban on foreign direct investment in Agricluture including horticulture, taking the land on lease shall not be possible. Foreigners cannot invest in your company when the activity is for the purpose of Horticulture.

joehovel 31 March 2015

Dear Mr SIVARAMAPRASAD KAPPAGANTU,thank you very much for the very helpful explanation and resource!

I'm working my way through a nmber of the refernced Master Circulars right now to ensure we don;t make any bad decisions in our advanture.

Kind Regards,

Joe

T. Kalaiselvan, Advocate (Advocate) 03 April 2015

You may follow the advise rendered by Mr. Sivaram and in addition you may consult a local consultant well versed on the subject to enquire about any other type of possibility in this regard involving foreign investment.