The seven-storey Canadian High Commission in Grosvenor Square, known as Macdonald House, will be converted into luxury residences for the super-rich, Indian media said.
"We will create a world-class development, which befits the status of the address," said Abhishek Lodha, managing director of Lodha Group.
The Lodha group was chosen as the buyer of the property by the Canadian government after a competitive bidding involving global developers and sovereign wealth funds, the Lodha Group said.
The Indian firm is buying the property through internal funds and does not plan to raise debt to finance the deal, officials said.
In 2010, India's Sahara group had acquired the Grosvenor House hotel in London for around $750 million (or nearly Rs 4,650 crore) from the Royal Bank of Scotland.
In December last year, the Lodha Group bought the US Consulate's Washington House property in Mumbai for $54 million (nearly Rs 34 crore).
The Lodha Group is building what it claims is the world's tallest purely residential tower in Mumbai, called "World One", set to be completed in 2014.