In India’s real estate market, particularly in major cities like Mumbai, Delhi, and Bengaluru, an LOI for commercial real estate is used to kick-start negotiations and provide a framework for a formal agreement. 

For instance, CapitaLand’s ₹19,200 crore investment in Maharashtra highlights the increasing demand for commercial spaces, making LOIs an important tool for buyers and sellers to establish mutual understanding before entering into a binding contract. 

This blog explains the importance of LOIs in commercial real estate in India, key sections, and optional clauses. It also includes a detailed LOI template for your transactions.

TL;DR

• A Letter of Intent (LOI) is a non-binding document used to outline the terms and intentions for purchasing commercial real estate in India.

• It serves as an initial agreement between the buyer and seller, typically covering key points like purchase price, payment terms, and due diligence.

• LOIs provide clarity, structure, and protection against market fluctuations, helping both parties avoid misunderstandings.

• While non-binding, specific clauses like exclusivity and confidentiality can be legally enforced if violated.

• The LOI should be used early in the transaction process, typically after identifying properties and before detailed due diligence begins.

What Is a Letter of Intent for a Commercial Property Purchase?

In the Indian real estate context, a Letter of Intent (LOI) for the purchase of commercial property serves as a formal expression of interest from a buyer to a seller regarding a specific property. 

This document outlines the preliminary terms of the proposed deal and serves as an initial commitment before entering into a detailed and legally binding purchase agreement.

Key Characteristics of an LOI in India: 

• Non-binding nature: Most LOIs in India are non-binding, providing flexibility while highlighting the significant aspects of the deal.

• Regulatory considerations: LOIs often refer to compliance with Indian property laws, such as the Real Estate (Regulation and Development) Act, 2016 (RERA), which mandates the registration of properties and establishes rights for buyers.

• Local market variations: India’s commercial real estate market exhibits significant variations across different regions. Tier 1 cities, such as Mumbai, Delhi, and Bengaluru, may require other considerations in terms of price negotiations and regulatory checks compared to Tier 2 and Tier 3 cities.

Understanding the key advantages of using an LOI can help streamline the negotiation process. Let’s break down the reasons why an LOI is crucial in real estate transactions.

Also Read: Guide for NRIs to Invest in Property in India: Insights & Tips

Why Use an Intent to Purchase Letter for Commercial Real Estate?

An Intent to Purchase Letter in India provides structure to the real estate transaction by clearly identifying the key elements of the deal from the outset.

1. Clarity and Confidence: An LOI helps both parties establish key expectations about the terms, thus avoiding ambiguity during the negotiation phase.

2. Protection against market fluctuations: India’s commercial property market can experience volatility. The LOI helps mitigate risks by setting clear deadlines and contingencies.

3. Indian legal environment: Including RERA compliance clauses in the LOI protects the buyer from potential legal issues, especially given the regulatory changes and legal complexities surrounding property titles and approvals in India.

Next, let’s look at the ideal stages in the real estate process where an LOI should be used for maximum benefit.

Also Read: What Is IOD in Real Estate? Meaning, Process & Importance

When to Use a Letter of Intent to Purchase?

A Letter of Intent is most useful in the early stages of a commercial real estate purchase. Here’s when you should consider using it:

1. After identifying potential properties

Once you have identified a property, an LOI is a useful tool to signal your intent to proceed, and it outlines your proposed terms.

2. Before entering due diligence

Commercial properties often require complex due diligence processes, including title checks, environmental clearances, and compliance with state-specific zoning regulations. The LOI should be used to set timelines and responsibilities for these checks.

3. To establish timelines and exclusivity

In a competitive market like India, an LOI can secure an exclusivity period, ensuring that the seller does not engage in negotiations with other potential buyers while you finalise due diligence.

Also Read: Ashwinder R Singh’s Real Estate Journey: From Banking Boardrooms to Building India’s Property Landscape

To ensure that your LOI covers all necessary aspects, here are the key components that should be included in a typical LOI.

What Should Be Included in a Letter of Intent for Commercial Real Estate Purchase?

A Letter of Intent for Commercial Real Estate Purchase should include these key components:

1. Date and Address Block

This includes the full date and the recipient's contact details. It's essential to ensure that communication is time-stamped and directed to the right parties.

2. Subject Line

Clearly state that the document is a Letter of Intent to Purchase, specifying the type of asset being purchased (e.g., real estate, business, property).

3. Introduction

Introduces the buyer and Seller and clarifies their roles in the transaction. This section sets the tone for the negotiation.

4. Transaction Overview

A concise description of the intended purchase, outlining the basic terms of the transaction, such as the type of purchase (e.g., real estate or business) and its general scope.

5. Purchase Price and Payment Terms

The purchase price should reflect current market trends (e.g., ₹15,000–₹25,000 per square foot in key cities like Mumbai or Delhi).

Payment terms include instalment payments based on milestones or project completion stages.

6. Property Details

The LOI should include property-specific information such as the built-up area, land title documents, and FAR (Floor Area Ratio), which is especially relevant for urban properties governed by municipal corporations.

7. Due Diligence

Outline the due diligence process, which may include verifying legal title, conducting RERA compliance checks, and performing environmental or structural assessments.

8. Exclusivity Clause

Prevents the seller from negotiating with other potential buyers for a specified period, ensuring the buyer has time to complete due diligence and finalise the deal.

9. Legal and Regulatory Compliance

Mentions compliance with local zoning laws, FEMA regulations (if foreign investments are involved), and RERA regulations, to ensure that the transaction is in line with India's legal and regulatory framework.

10. Timelines for Closure

Given India's regulatory complexities, the LOI should set a timeline for completing the transaction, with deadlines for due diligence, regulatory approvals, and the final agreement.

Also Read: Hyderabad Telangana Real Estate Market Trends 2025

Although LOIs are generally non-binding, let’s examine when certain clauses within the LOI can have legal implications.

Is an Intent to Purchase Letter Binding for Commercial Real Estate?

Generally, a Letter of Intent is not binding in Indian commercial real estate transactions. However, the document can include binding provisions in specific areas, like confidentiality agreements or exclusivity clauses.

1. Non-binding nature

Most LOIs are used to outline the major terms, but they do not compel the parties to enter into a final purchase agreement. This provides flexibility for both buyers and sellers in India, allowing them to renegotiate terms without legal consequences.

2. Binding clauses

Certain clauses, such as confidentiality, dispute resolution, and exclusivity, may be legally binding. These clauses are particularly important in India, given the frequent legal disputes that arise in real estate transactions.

3. Practical implications

In India, while LOIs are generally non-binding, breaches of binding clauses like exclusive negotiations or confidentiality can lead to legal action. Buyers can seek remedies for damages if such clauses are violated, as per Indian contract laws.

For developers and investors learning India's commercial real estate market, BCD India's expertise offers tailored solutions to ensure compliance and optimise investment outcomes. Let our team guide you through every step with confidence.

Now, let’s look at a practical template for creating a Letter of Intent for your own commercial real estate transactions.

LOI Template: Commercial Real Estate

This Letter of Intent outlines the proposed transaction, enabling both the buyer and Seller to proceed with further negotiations and due diligence, ultimately leading to a formal purchase agreement.

[Date]

To,
[Seller’s Name]
[Seller’s Address]
[City, State, Zip Code]

Subject: Letter of Intent to Purchase Commercial Property

Dear [Seller's Name],

This Letter of Intent (“LOI”) sets forth the proposed terms and conditions for the purchase of the commercial property located at [Property Address] (the "Property"). The purpose of this LOI is to outline the initial understanding of the parties involved and provide a basis for the negotiation of a formal Purchase Agreement.

1. Buyer

Name of buyer: [buyer’s Name]
Mailing Address: [buyer’s Address]
Contact Information: [buyer’s Contact Information]

2. Seller

Name of Seller: [Seller’s Name]
Mailing Address: [Seller’s Address]
Contact Information: [Seller’s Contact Information]

3. Property Description

The commercial property to be purchased is located at:
[Property Address]
Property Type: [e.g., Office space, commercial building, land, etc.]
Land Area: [specify area]
Built-up Area: [specify area]
FAR (Floor Area Ratio): [specify]

4. Purchase Price and Payment Terms

The proposed purchase price for the Property is ₹[XX,XXX,XXX] (Indian Rupees) subject to adjustments post-inspection and due diligence. The payment structure will be as follows:

• Initial Deposit: ₹[XX,XXX]

• Remaining Balance: ₹[XX,XXX] to be paid upon closing, subject to satisfactory due diligence and inspection.

5. Due Diligence Period

The buyer shall have a due diligence period of [XX] days following the execution of this LOI to inspect the Property, verify title, conduct necessary environmental or structural assessments, and perform regulatory compliance checks (including with RERA and local zoning laws). 

If any significant issues arise during due diligence, the buyer may renegotiate terms or terminate the transaction with the return of the earnest money.

6. Exclusivity Period

The Seller agrees that for a period of [XX] days from the date of this LOI, they will not negotiate the sale of the Property with any other potential buyers. 

This exclusivity period enables the buyer to conduct due diligence and proceed with negotiating a formal Purchase Agreement.

7. Closing Date

The closing of the transaction will take place on or before [DD/MM/YYYY], contingent upon satisfactory completion of due diligence, financing approval (if applicable), and all necessary regulatory approvals.

8. Confidentiality 

Both parties agree to maintain confidentiality regarding the terms and existence of this LOI, as well as any confidential information exchanged during the due diligence process. This confidentiality obligation shall remain in effect until the execution of a formal Purchase Agreement.

9. Non-Binding Nature

This LOI is intended to outline the general terms of the proposed transaction but is non-binding, except for the provisions related to confidentiality, exclusivity, and other clauses deemed binding by the parties. 

Both parties agree to enter into a formal, legally binding Purchase Agreement once the terms are agreed upon.

10. Governing Law

This LOI shall be governed by and construed in accordance with the laws of [State, Country].

11. Closing

This LOI reflects the intent of the parties to negotiate and finalize a formal Purchase Agreement based on the terms outlined herein. If the buyer and Seller reach a mutual agreement, they will proceed to execute the formal agreement.

Seller’s Signature: ___________________________
Print Name: ___________________________
Date: _______________________

Buyer’s Signature: ___________________________
Print Name: ___________________________
Date: _______________________

While it’s important to cover essential sections, not every clause is necessary for every transaction. 

What Can Be Excluded from a Commercial Real Estate LOI in India?

Certain sections may not be necessary depending on the transaction's simplicity:

• Break Fee: If both parties are comfortable with the basic terms, this can be omitted. It's typically used for more high-value or high-risk transactions.

• Governing Law: If both parties are within the same jurisdiction, specifying governing law may not be needed.

• Dispute Resolution: This can be omitted if the parties are confident in resolving potential issues amicably without formal processes.

• Financing Contingency: If the buyer has secured financing or does not need external funding, this clause is unnecessary.

• Regulatory Approvals: If the transaction does not require governmental approvals, this can be left out.

• Asset List: This is typically used for multi-asset transactions. For a straightforward property purchase, it may not be needed.

• Employee Matters: This is only relevant when the transaction involves the transfer of employees.

Final Thoughts 

LOIs are essential in commercial real estate transactions in India, outlining key terms and providing clarity for both parties. They help address regulatory aspects like RERA and cover important legal elements such as exclusivity, confidentiality, and due diligence. Understanding these factors ensures smooth negotiations and protects against risks.

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FAQs

Q: Can an LOI be modified after it’s signed?
A: Yes, an LOI can be modified by mutual consent from both parties. It’s not legally binding, so adjustments can be made as long as both the buyer and seller agree on the new terms.

Q: How does an LOI protect both parties in a commercial real estate deal?
A: An LOI outlines key deal terms, ensuring both parties are aligned on price, payment structure, and timelines, reducing the risk of disputes during the negotiation phase.

Q: What happens if a seller breaches an LOI's exclusivity clause?
A: If a seller breaches an exclusivity clause in India, the buyer can seek legal remedies, including financial compensation for any damages caused by the breach, under Indian contract law.

Q: Are LOIs commonly used for residential real estate transactions?
A: LOIs are more commonly used in commercial real estate transactions due to the complexity and higher stakes involved. Residential transactions usually don’t require an LOI unless the deal involves a significant development.

Q: Can a buyer walk away after signing an LOI?
A: Yes, a buyer can typically walk away after signing an LOI, as the document is non-binding unless specific clauses (like exclusivity or confidentiality) are violated. However, it’s important to review the terms in detail to ensure there are no penalties.