On July 1, 2026, Indiana significantly expanded upon its 2024 restrictions on foreign ownership of real property under Senate Enrolled Act 256 (SEA 256), codified at Indiana Code § 32-22-3.5.
While the law continues to focus on individuals and entities tied to designated “foreign adversaries,” its broader definitions—and the severity of available remedies, including forced divesture of the property—introduce new considerations for real estate transactions, joint ventures, and syndications involving Indiana real property.
Who Will Now Be Considered “Prohibited Persons” Under Indiana SEA 256?
A “prohibited person” is barred from acquiring or entering into a new lease agreement as a lessee for any real property in Indiana, subject to certain exceptions for residential properties. A “foreign adversary” includes:
- China
- Russia
- North Korea
- Iran
- Cuba
- Venezuela
“Prohibited persons” includes:
- An individual who is a citizen of a foreign adversary.
- An individual who is domiciled in a foreign adversary.
- A business entity organized under the laws of a foreign adversary.
- A business entity headquartered in a foreign adversary.
- A business entity with a “controlling person” that is one of the following:
- An individual who is a citizen of a foreign adversary.
- An individual who is domiciled in a foreign adversary.
- A business entity or other entity, including a governmental entity, that is owned or controlled by a citizen or domiciliary of a foreign adversary, or is directly controlled by the government of a foreign adversary.
A prohibited person also includes an agent, trustee, or fiduciary acting on behalf of those listed above.
Why Joint Ventures and Syndications Deserve a Closer Look
As noted above, a “controlling person” could raise concerns for sponsors and syndicators acquiring real property in Indiana.
A “controlling person” includes:
- A beneficial owner of at least 51% of the shares or membership interests of a business entity;
- An officer, a director, or any other individual who possesses inside information about a business entity because of the officer, director, or other individual’s relationship with the business entity; and
- A person, individually or as a member of a group who has the ability to directly or indirectly affect a business entity’s management or policies.
As a result, joint ventures, private equity structures, and real estate syndications with layered ownership—particularly those involving institutional capital or offshore investors—may need to implement heightened diligence and obtain additional assurances from investors and equity partners.
Individuals Who Are Not Considered Prohibited Persons
While the “individual” definitions above are quite broad, they do not include an individual who:
- Has dual citizenship with the United States and a “foreign adversary;”
- Is a citizen or lawful permanent resident of the United States; or
- Has been granted asylum in the United States.
What About Existing Property Owners?
Any prohibited person owning real property in Indiana before July 1, 2026, may continue to own such property, provided that the person is not an agent of a foreign adversary.
How Real Estate Investors and Sponsors Should Prepare
Given the breadth of the law and severity of potential remedies, real estate stakeholders should take early, proactive steps to reduce risk.
Strategies for compliance may include:
- Enhanced investor and ownership diligence around control structures, especially in joint ventures and capital stacks involving multiple tiers of investors.
- Updated Legal Documentation. Representations and warranties addressing prohibited person status in purchase agreements, operating agreements, and financing documents.
- Ongoing compliance monitoring when ownership interests change over time, including through transfers, redemptions, or secondary-market activity.
While enforcement practices and potential guidance will ultimately shape the statute’s application, the breadth of its definitions and severity of potential remedies makes early planning critical.
Indiana Is Not Alone: A Broader National Trend & What to Consider When Planning Ahead
Indiana is not alone in reevaluating foreign ownership of real property, and similar restrictions have been enacted or proposed in numerous states. Real estate investors, developers, and sponsors with existing or planned Indiana investments should assess how the new law may affect transaction structures, documentation, and long-term ownership strategies.
Special thanks to summer associate Kyle Carlson for his contributions to this article. Kyle is not yet admitted to practice in any jurisdiction.
