Hi Franki
Yes a foreigner can buy a bike in India. We (Irish & German) just did, in Delhi. Here is how:
Went to Karol Bagh motorcycle market, a street absolutely packed with motorcycle dealers (Enfield, Baaj, Hero Honda, Yamaha, anything) mostly second hand but also new.
Shopped around, having bikes shown to us and initial prices quoted (you can haggle later). Beware: the bikes are shown dirty and in whatever state they are in. The dealer will only clean it and fix it up once you've said you'll buy. So listen to the engine, maybe test ride (don't jump on the back with them, they ride like mental!) and make sure you're happy with the essentials: starts no problem, engine, the way the gears shift, brakes....
Chose our bike and start haggling about price and work to be done.
Come back to pick up bike at agreed time and check all is done. Have them perform the oil change in front of you, otherwise you'll have to take their word for it that its done.
They should give you:
1) Sales receipt,
2) Bike Papers: actually a credit card sized plastic card with bike details on it,
3) Forms 29 & 30 "No Obligation Certificate". This is the bit you've heard about. Technically the bike still belongs to the original owner, you as a foreigner cannot own it. These forms should be signed by the owner. They allow you to sell the bike on with his permission so to speak.
To get all of this, all you need is a copy of your passport and your visa (I have heard visa duration may play a part, please confirm this. We have 6 Month tourist and it wasn't a problem).
Then have them take you to the insurance office with the bike papers (there are some in the back streets). You have to purchase an entire years worth and its basic 3rd party. Should cost around 500 Rs plus a little extra cut they take as commission so maybe 700Rs in total.
Apropos commission, most shops add a commission of 5000Rs or so to the agreed bike price. Take that into account when haggling or agree on that beforehand too.
You also need a pollution certificate. Ideally they get that for you, before you buy. But if they don't, they'll point you to the petrol station where you can get one at a booth on the side. The regulations are so lenient, most bikes pass. But just in case, make sure yours doesn't blow white smoke for example when you buy it (in that case you shouldn't buy it anyways as it means engine problems).
That's it, you're good to go. We bought Bajaj Pulsar 220cc (get carb model as FI here is supposed to be a disaster). We just strap a tent, dry bag and tarps to the back and a backpack to the tank. So we didn't make any modifications. (Some bikes come with luggage rack or side box if you need it.) We've taken them into the Himalayas above 5000 meters, on potholed gravel roads, through deep sand and water running across the road in ravines, and they have done all this just fine without modifications or knobbly tires.
True, we have needed some repairs like fork seals and clutch plates. But all that is so cheap here in India (puncture repair for $1.50), that we haven't taken any tools and decided to just repair on a needs must basis.
Just bear in mind how most people treat bikes in India. So our 2011 models are OLD. Get the newest you can afford (or a really good condition old one, if you can tell on first sight - I cant...) and just balance that against the fact they may not have the latest parts in the most remotest areas. (But against common belief, they have all types of bikes in the Himalayas, not just Enfield and they had the Bajaj parts we needed in places like Leh. So while a wickid looking bike, Enfield isn't necessarily the only option.) But then most mechnics can do a bodge fix to get you going anywhere.
As for state border crossings, we are yet to be stopped. (Been in Delhi, Uttar Pradesh, Himachal Pradesh, Jammu & Kashmir, Punjab, Rajastan, Gujarat so far.) The police stopped us once in the mountains, but all they wanted was our passports and visa and the bike registration off the numberplate. No one has asked for the bike papers so far.
If you want any more info on how we did things and what we've got up to with the bikes, check our website:
India | followingtarmac (scroll to the bottom to find the post on buying the bikes)
Hope that helps.... Good luck and have fun!