Karnataka Notifies Peenya as Special Investment Region to Boost Industrial Growth

India’s southern state of Karnataka has designated Bengaluru’s Peenya Industrial Area as the state’s 18th Special Investment Region (SIR), empowering KIADB to lead infrastructure upgrades, streamline governance, and attract new investments in one of South India’s largest MSME hubs.

On June 9, 2025, the Karnataka state government officially designated Bengaluru’s Peenya Industrial Area as the state’s 18th Special Investment Region (SIR) under the Karnataka Special Investment Region Act, 2022. With this move, the state has launched a new phase of its industrial development strategy to enhance infrastructure delivery, streamline regulations, and strengthen investor confidence.

Peenya, established in the late 1970s, has developed into a major industrial zone within Bengaluru. Covering over 1,461 acres, it hosts nearly 13,000 micro, small, and medium enterprises (MSMEs) and employs more than 500,000 workers. By designating Peenya as an SIR, the state underscores its economic prominence and a clear intent to modernize governance across high-potential industrial corridors.

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Strategic importance of Peenya

Peenya plays a central role in Karnataka’s industrial landscape, with a diverse mix of enterprises spanning manufacturing, precision engineering, electricals, textiles, garments, and technology-based start-ups. This sectoral breadth enables the area to remain resilient and competitive amid shifting market dynamics.

Beyond its industrial output, Peenya is a major employment engine—particularly for women, who make up nearly half of the region’s workforce. Its proximity to key residential zones, commercial centers, and transportation networks makes it a strategically located hub, offering logistical advantages for businesses and facilitating access to talent and markets.

What does SIR status mean

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The designation of Peenya as a SIR brings a significant shift in governance and regulatory oversight. With this change, the Karnataka Industrial Areas Development Board (KIADB) now serves as the Regional Development Authority (RDA), assuming full administrative control over the region’s planning, infrastructure, and compliance mechanisms.

Karnataka has officially recognized Peenya as an industrial township, removing it from the jurisdiction of local municipal bodies. RDAs, like KIADB in this case, drive strategic, region-wide economic development and regeneration by coordinating efforts across multiple municipalities. In contrast, local municipal bodies typically manage essential services and infrastructure within individual cities or towns.

By transferring authority to KIADB, the state aims to eliminate bureaucratic overlap and spare businesses from navigating multiple layers of regulation. KIADB will now serve as a single-window authority, managing land allocation, infrastructure planning, taxation, and regulatory approvals.

This shift enables faster decision-making, ensures greater policy consistency, and allows for more responsive governance tailored to industrial needs. The move aligns with Karnataka’s broader goal of improving the ease of doing business and fostering a more investor-friendly environment in its key manufacturing hubs.

Infrastructure and revenue implications

One of the most tangible benefits of Peenya’s SIR status is the revised structure for property tax allocation. Under the new framework, 70 percent of the property tax collected in the region will be retained locally and reinvested directly into infrastructure development and maintenance. The remaining 30 percent will be remitted to the original local body from which the area was carved out.

This shift is expected to address long-standing infrastructure and civic challenges that have plagued the industrial area for years. These deficiencies have hindered industrial productivity and contributed to operational inefficiencies across sectors.

With the KIADB now in charge of infrastructure planning and spending, stakeholders anticipate a more targeted and accountable approach to resolving these gaps. The dedicated use of locally collected revenue is intended to fast-track upgrades and deliver visible improvements, providing long-overdue improvements for businesses previously affected by poor public services.

Industry reactions and expectations

The notification of Peenya as a SIR has been widely welcomed by local industry bodies, marking the culmination of a demand that dates back more than two decades. Industry associations such as the Karnataka Small Scale Industries Association (KASSIA) and the Peenya Industries Association (PIA) have expressed strong support for the move. Both associations have described it as a long-awaited step toward revitalizing Peenya’s industrial infrastructure.

Industry leaders believe the SIR status will streamline service delivery, enhance infrastructure, and bring greater administrative coherence.

However, stakeholders have also voiced concerns over the composition of the RDA’s 15-member governing committee. With only two seats allotted to industry representatives, many feel that the current structure offers insufficient representation for those who know the region’s needs firsthand. Both KASSIA and PIA have urged the state government to expand industry participation—ideally making up at least 50 percent of the committee—to ensure more informed and responsive governance.

While the new administrative model promises efficiency, its success may ultimately depend on how inclusively it engages the private sector in decision-making processes.

Legal and policy framework

Peenya’s recognition as an SIR under the Karnataka Special Investment Region Act, 2022, establishes a clear legal and institutional framework to promote structured industrial growth. Key provisions of the Act include the following:

• Centralized governance: KIADB oversees all aspects of planning, development, regulation, and management within the SIR, replacing local municipal authorities.
• Land use and infrastructure planning: The RDA is responsible for drafting development plans, town planning schemes, and zoning for economic activities and civic amenities.
• PPP facilitation: The Act enables partnerships with private developers for infrastructure projects through transparent Public-Private Partnership (PPP) models.
• Dispute resolution: A tiered mechanism—including grievance redressal, an appellate forum, and a final dispute settlement authority—ensures faster resolution of conflicts among stakeholders.

This model aligns with other notable SIRs, such as Dholera in Gujarat, where strong regulatory clarity and unified planning have supported large-scale investments and infrastructure-led development.

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Investment and operational outlook

The designation of Peenya as a SIR brings clear advantages to both businesses and investors. By placing administrative functions under the KIADB, authorities aim to reduce bureaucratic hurdles and implement policies more consistently—key factors in enhancing the ease of doing business.

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Investors can now explore new opportunities across manufacturing and support sectors, thanks to the restructured governance and revenue model. MSMEs stand to benefit from better civic services, upgraded infrastructure, and streamlined compliance processes. At the same time, large firms in manufacturing, logistics, and ancillary services see Peenya’s strong industrial base and connectivity as a strategic advantage for scaling operations or entering Karnataka’s industrial sector.

(With inputs from Archana Rao.)

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