Idle government land could unlock India’s next industrial revolution
We have been lamenting forever that our land acquisition laws for industry are broken.
Committees are formed. Reports are written. Bills are drafted, debated, diluted, and quietly shelved.
And then we wait for the next crisis to remind us.
Meanwhile, factories that should have come up in UP, for the sheer size of India, are rising in tiny Vietnam.
Supply chains that should have anchored in Tamil Nadu are in Indonesia.
The problem is not that we lack solutions.
The problem is that we keep looking at only the politically most explosive solution, and then wonder why it blows up in our hands.
There is a simpler path.
And it has been hiding in plain sight, inside the balance sheets of the very departments that serve India.
The government is sitting on millions of acres of idle land while investors struggle to find a footing.
A 99-year (or even shorter term) lease, not a sale, could unlock India’s next industrial revolution without a single political battle over land ownership.
Don’t sell land. Just lease it. The nation loses nothing. The investor gets what they need.
The asset base ‘out of sight’
The Indian government, Central and State, sits on land holdings so vast that their full extent has never been comprehensively mapped.
Defence cantonments alone hold an estimated 17 lakh acres.
Indian Railways controls over 11 lakh acres, much of it abutting some of the best-connected transport corridors in the country.
Add to this the sprawling, largely purposeless landbanks of public sector undertakings, port trusts, urban development authorities, and state revenue departments, and you have an asset of staggering scale, sitting idle, generating nothing, serving no one.
Not sold. Not developed. Not leased. Just held.
Easier legally, socially, and politically
The proposal here is not radical.
It does not require new legislation to override state laws.
It does not dispossess a single farmer.
It does not pit development against community rights.
It is simply this: lease government land that doesn’t have any specific need in the near future to industrial investors on long-term leases of up to 99 years, on condition that the land be used for productive industrial purposes.
The ownership never transfers.
The land returns to the government when the industrial use ends.
In exchange, the investor gets secure, long-term access to land at a fraction of what private acquisition would cost, and gets to put the rest of their capital to far better use.
And the government department that parts with the unproductive land temporarily receives regular income.
If, in the most unlikely even at any time, the government department badly needs that land, acquisition of any nearby land can always be considered, and this will have less objection.
Free the idle land. Watch factories follow.
Unlocking capital for growth
Consider what happens to an investor’s balance sheet under this model.
Today, acquiring industrial land in India, especially near infrastructure corridors or urban centres, can consume anywhere from 20% to 40% of a project’s total capital outlay.
That is capital permanently locked into an illiquid, single-purpose asset whose value to the investor depends entirely on the project succeeding.
It cannot be easily moved, monetised, or redeployed if the business environment changes.
Under a leasing model, that capital is freed.
Better collateral than if sold
If considered necessary, the investor can take a fraction of it, say 10 to 15%, acquire inexpensive agricultural or semi-urban land elsewhere, lease for agriculture or develop a commercial property, or even hold diversified assets.
That portfolio can then be offered as collateral to lenders.
The collateral base is not weakened; in many cases, it is strengthened, because the investor now holds a diversified asset base rather than a single illiquid plot tied to one industrial bet.
That property can even be traded for better-yielding property anytime, or even monetised, unlike Industry-tied property.
The freed-up capital also directly improves the project’s debt-service capacity, making greenfield investments more attractive to banks and project finance institutions.
The investor wins. The lender wins. The factory gets built. Jobs get created.
The land never leaves India. It never leaves the government. It simply starts working.
From idle holdings to revenue streams
Critics may ask: what about the government departments whose land is being leased out?
Defence establishments, Railways, and PSUs hold some of their land for planned operational purposes, but mostly for unspecified purposes.
Industrial activity on leased government land generates a stream of economic value: to the department, employment, output, tax revenues, and multiplier effects to the whole state.
This lease rental is not a token amount.
Over a 99-year lease on a productive industrial cluster, the cumulative rental income will be substantial, far exceeding the land’s worth.
The 99-year term is a maximum.
Most industries will complete their life cycle in decades, returning the land sooner.
And the most interesting part of the deal is: the 99-year lease is only on paper.
Most of the industries will complete their life cycle in a decade or two, and the land will be released from lease.
A politically unassailable path
Land reform has failed in India, not because the economics were wrong but because politics made it impossible.
Every attempt to acquire land for industry, however well-intentioned, however generously compensated, runs into the immovable reality that land in India carries identity, inheritance, and sovereignty far beyond its market value.
Farmers who accept monetary compensation are told they are betraying their ancestors.
Politicians who support acquisition are accused of serving capital over the community.
The debate becomes tribal before it becomes rational.
Beauty of the leasing model
The leasing model sidesteps this entirely.
The land is not sold. It is not acquired from private owners.
It is not alienated from the government. It is leased for a specific productive purpose, to which it reverts when that purpose ends, along with a good, regular income.
There is no community displacement to protest.
There is no “land grab” narrative to amplify.
The proposal is, in the most practical sense, politically unassailable.
Removing the first barrier
India has spent three decades building the case for investment – liberalising its economy, reforming its taxes, digitising its bureaucracy, and projecting itself as the world’s most promising manufacturing destination.
All of that work is undermined every time a credible investor walks away because the land question has no answer.
The leasing model does not solve every problem in India’s investment climate.
It does not fix port congestion, power tariffs, or labour law rigidity.
But it removes the first and most visceral barrier – the question of where exactly the factory is supposed to be located.
The government already owns the solution.
It is sitting on it.
The only decision required is whether to keep sitting or to put it to good use.
Note:
1. Text in Blue points to additional data on the topic.
2. The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.
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