Other BriefingsUnused Land, Building Laws Confront India’s Policymakers Targeting High Industrial Growth
Some Indian states are seeking to make available unused land for industrial activity, including plots within existing industrial zones. We discuss these initiatives in the states of West Bengal, Telangana, and Gujarat. However, besides vacant plots, India’s restrictive building laws often prevent factories from properly utilizing their land.
Initiatives to unlock potential of underutilized industrial land
West Bengal
In March 2024, the state of West Bengal in India announced its decision to launch a program to supply land for the creation of new industries, making use of unused land plots in existing industrial districts and closed industry sites. Totaling around 1739 acres in total, the West Bengal government has established nine industrial parks, which have received federal approval.
The unused parcels also include 193 acres in the Dhakeshwari cotton mills plot, 69 acres in the Belur area under NESCO’s ownership, and 132 acres of underutilized property in Durgapur.
Prominent industrial parks offering available land include the Budge Budge Industrial Park (9.9 acres) in South 24 Parganas, Ankurhati Park (8.8 acres) in Domjur, Howrah, Haringhata Industrial Park (358 acres) in Nadia, and Haldia Industrial Park (306 acres) in East Midnapore. Vidyasagar Industrial Park, situated near Kharagpur, has attracted cycle manufacturing enterprises, leveraging the ample underutilized space for industrial pursuits.
This marks the inaugural initiative of its kind in West Bengal, aimed at unlocking the potential of underutilized industrial land for new business ventures. The West Bengal state government facilitated the conversion of leasehold land to freehold during the fiscal year 2022–2023, subject to a set fee structure.
Telangana
There is an urgent nationwide demand for the government to facilitate the establishment of new enterprises; the acquisition of land for commercial purposes remains a challenging process.
In 2023, the Telangana government announced its intent to permit various businesses and organizations to repurpose underutilized government land. Approximately 1,800 acres of such unutilized land, allocated between 2004 and 2014, have been identified, prompting notifications to the respective authorities.
A vast area of unused land, predominantly situated in areas formerly encompassed by Rangareddy—specifically, Serilingampally, Shamirpet, Ibrahimpatnam, Raviryala, and Maheshwaram—has been allocated to diverse enterprises. But it has been reported that some entities are utilizing only a fraction of the allotted space and others are ceasing operations for various reasons.
In the previous year, Telangana state welcomed the Foxconn group with a substantial land allocation of 200 acres in Kongra Kalan, located near the capital city of Hyderabad. However, the state government is presently entangled in a legal dispute concerning the acquisition of a fresh tranche of land for Hyderabad Pharma City.
As India actively strives to enhance its production capacity across key sectors, the necessity for available land to meet the escalating demands of manufacturing and industrial expansion is evident.
Gujarat
In January 2024, the Gujarat government introduced a strategy to reclaim unused land within the industrial parks administered by the Gujarat Industrial Development Corporation (GIDC). According to the initiative, industries voluntarily surrendering land will receive a reimbursement of up to 75 percent of the market value of the industrial property.
The state government’s launch scheme is anticipated to assist companies facing challenges in operating units and facilitate the redistribution of these industrial estate plots, thereby stimulating economic growth and job creation.
According to Ajay Patel, the President of the Gujarat Chamber of Commerce and Industry (GCCI), this measure is poised to incentivize industries that were impeded from commencing operations, particularly due to the impact of the COVID-19 outbreak and other factors, to relinquish their permits. Patel further emphasized that this decision would substantially aid other sectors in establishing themselves on plots that have been abandoned by the original holders.
Kerala
The southern state of India, Kerala, has also taken a number of actions to make use of vacant land. According to reports, the state government plans to create campus industrial parks in its higher education institutions as part of the Campus Industrial Park Scheme 2024, which aims to solve the shortage of available land for industrial usage.
Building laws in India: Impact on efficient land utilization by factories in different states
As various Indian states seek to expand their industrial activity, there will be more pressure on authorities to ease regulatory restrictions.
India’s regulations on building standards limit factories from efficiently utilizing the plot area or expanding vertically. Industrial buildings face constraints imposed by various building standards, resulting in the loss of productive land. Among these standards, land loss predominantly arises from setbacks (required strips of land around buildings), parking regulations, ground coverage limitations (which restrict the portion of the plot area that can be covered by buildings), and floor area ratio (FAR, the ratio between a building’s constructed floor area and the land area).
According to the State of Regulation Report by Prosperiti, which compares 10 states on factory land lost to building standards and the opportunity cost of land lost, factories in India can lose over 50 percent of their land due to building standards, resulting in businesses paying full price for only half of the land’s use.
The report assesses the costs incurred by micro, small, medium, large, and mega factories in each of the 10 states, considering land, monetary, and job losses.
Haryana emerges as the least restrictive state overall, while Tamil Nadu proves more accommodating to large and mega factories. Notably, Haryana allows factories of any size to utilize over 50 percent of the plot, while Odisha, Bihar, and Delhi impose the most restrictions across all factory sizes. Among the states studied in the Prosperiti report, Haryana is the only state that is comparable to Singapore.
About us
India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for more support on doing business in India.
We also maintain offices or have alliance partners assisting foreign investors in Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Bangladesh, Italy, Germany, Australia, and the United States.
- Previous Article India, UK FTA Negotiations: Key Updates
- Next Article Inside India’s Manufacturing Revolution: Strategies and Insights for Business Success – New Publication Out Now
