Leasing a Factory in India: Land Use, Power, Pollution & Fire Checks

A factory can have the right size, the right lease amount and a friendly owner, and still be a building you cannot use. Unlike an office, an industrial unit has to pass a set of checks that are specific to your process: what you make, what you emit, how much power you draw and how heavy your machines are.

This is the checklist we suggest working through, in roughly this order, before paying a token.

1. Land use: are you allowed to manufacture there?

Start here, because nothing else matters if the answer is no.

• Zoning. The plot should be in a zone that permits industrial activity under the local master plan. Plots in notified industrial areas and state industrial development corporation estates are the simplest case.
• Permitted category. Some estates restrict what can be made: for example, only non-polluting or light industry. Ask for the allotment letter or lease deed from the development authority and read the permitted-use clause.
• Sub-letting permission. On plots allotted by a state industrial corporation, the owner may need the authority's permission to lease the premises to you. Ask to see it.

A building that is "being used as a factory" by the previous tenant is not proof that the use is permitted.

2. Title and building approvals

• Who owns it. The title deed or allotment letter, and proof that the person signing is the owner or holds a valid authorisation.
• Sanctioned building plan, and a completion or occupancy certificate for what is actually built. Extra floors or sheds added later without approval are a risk you inherit as the occupier.
• Property tax receipts and no pending dues.

Our guide to documents required to lease commercial property lists the paperwork from both sides.

3. Power: sanctioned load and supply

For most manufacturers this is the single most expensive thing to get wrong.

• Sanctioned load. Ask for a recent electricity bill. It shows the sanctioned load (in kW or kVA), the connection category and the tariff. Add up the rated load of your machines, with a margin, and compare.
• HT or LT. Larger loads are supplied at high tension and need a transformer. Check whether one is installed, its capacity, and who owns and maintains it.
• Load enhancement. If you need more than the sanctioned load, find out before you sign how long the local distribution company takes and what it costs, and agree who applies and who pays.
• Backup. Is there a DG set, what capacity, and is its running cost charged separately?
• Dues. Make sure there are no unpaid electricity bills on the connection.

4. Pollution control board consent

Most manufacturing units in India need consent from the State Pollution Control Board: Consent to Establish before setting up, and Consent to Operate before starting production.

• Industries are grouped into colour categories by pollution potential (red, orange, green and white). The category affects where you can locate and how long consent takes.
• Check that your category is permitted at this location, and whether the area has common facilities such as an effluent treatment plant if your process needs one.
• Consent is applied for by the operating unit, which normally means you. You will need property documents from the owner, so write their cooperation into the lease.

If your process is in a high-pollution category, speak to an environmental consultant before you shortlist buildings, not after.

5. Fire safety

• Fire NOC. Ask for the current fire no-objection certificate and its validity date. Requirements vary by state and by building height, area and occupancy.
• Equipment on site. Hydrants, hose reels, extinguishers, alarms, water tank and pump. Check they exist and work.
• Exits. Two independent staircases or exits on upper floors, kept clear.
• Your own stock. Storing flammable material may trigger additional licences that the building's NOC does not cover.

6. The building itself

• Floor loading. Ground floors should be suitable for your heaviest machine; ask about the floor specification. On upper floors, ask for the slab's designed load. Do not guess.
• Clear height and column grid. Enough height for your machines, cranes and racking, and column spacing that fits your layout. Our comparison of PEB sheds and RCC buildings explains which suits what.
• Goods lift. Capacity and size, if you are taking upper floors.
• Water and drainage. Source, storage, and where process water goes.
• Roof and walls. Leaks, insulation, ventilation. Visit once after rain if you can.

7. Access and logistics

• Road width and turning space for the largest truck you use, including the gate.
• Loading and unloading area, and whether trucks can wait inside the compound.
• Entry restrictions. Many cities restrict heavy vehicles during the day.
• Labour. Where your workers will come from, and public transport to the site.

8. Licences you will need as the occupier

These attach to your operation, not to the building, but the premises must be capable of supporting them:

• Factory licence under the applicable factories law, where your headcount and power use cross the thresholds.
• Udyam registration, GST registration at the new address, and any trade licence the local body requires.
• Sector-specific licences, for example for food, pharmaceuticals or explosives.

Requirements differ by state and industry. Treat this list as a prompt for your consultant, not a substitute for one.

9. The lease terms

• Fit-out period without a lease amount while you install machines and wait for consents.
• Lock-in and tenure. Moving a factory is expensive, so match the tenure to your investment.
• Escalation, security deposit and maintenance: see our guide to deposits and maintenance charges.
• Structural repairs are the owner's; day-to-day upkeep is usually yours. Say so in writing.
• Exit if consents are refused. If a statutory approval is denied for a reason connected to the property, you should be able to leave and get your deposit back.
• Registration. A lease for more than a year needs to be registered; our step-by-step leasing guide covers the process, and how to negotiate a commercial lease covers the commercial terms.

One-page summary

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