Many Indians are
moving out to other countries in search of jobs and returning back only after
retirement. Nevertheless, their desire to own a house in their motherland never
dies, which, no doubt, is an asset, but is also source of revenue for the
Government.
Acquisition
and transfer of immovable property in India by Non-Resident Indians (NRIs) and
persons of Indian Origin (PIO) are regulated by certain legislations, which envisages
certain terms and conditions, as discussed below:
FERA and FEMA
The earliest
law regulating transactions involving acquisition and transfer of the immovableproperties by NRIs and PIO is the Foreign Exchange Regulation Act 1973 (FERA)
and the same has been now replaced by Foreign Exchange Management Act, 1999
(Act 42 of 1999) (FEMA), which came into force from 1-6-2000. FEMA has authorized
the Reserve Bank of India
to form guidelines with regard to acquisition of immovable property by NRIs and
PIO.
The following
are the explanation given to the frequently used terminologies and certain
mandatory pre-requisites before acquiring or transferring the property by NRIs
or PIOs, which does not require prior permission of RBI.
Non-Resident Indians:
FEMA defines
a NRI as a person not residing in India . This category includes:
1.
Indian citizens who reside outside for employment,
carrying on any business, vocation or any other purpose indicating definite
period of stay outside India.
2.
Indian citizens employed abroad with foreign
government, international agencies like UNO, IMF, World Bank etc.
3.
Employees of Central and State Governments deputed
abroad on temporary assignments or posted to their offices. This includes
Indian diplomatic missions.
An Indian
citizen who goes abroad on a student visa and takes up appointment after the completion
of studies will be regarded as a person residing outside India only
after taking up a job abroad. Non-Resident Indians are not regarded as
residents in India
for holidays, business, etc. Persons residing in India
means a person residing in India
for more than one hundred and eighty two days during the previous financial
year, but does not include the persons above.
PIOs
A PIO means a
person residing outside India ,
holding an Indian passport, whose father or grandfather was an Indian citizen
by virtue of the Constitution of India or the Citizenship Act, 1955. However,
the citizens of Pakistan , Bangladesh , Sri
Lanka , Afghanistan ,
China , Iran , Nepal
and Bhutan
do not fall under this category.
Acquisition / Transfer of Immovable
Property by a NRI
NRIs can acquire or transfer any immovable
property in India
except an agricultural land, plantation property and farmhouse. However, they
can transfer the same to an Indian Citizen residing in India .
Acquisition and Transfer of
immovable property by PIO
Following are
the permissible norms for a PIO.
PIO may
purchase any immovable property except agricultural land, farmhouse and
plantation property provided the funds are met out of the funds received in India by inward remittances from outside India or from
the funds held in non-resident account, complying with provisions of Act and
guidelines of RBI. PIO may accept any immovable property by way of gift from a
person resident in India
or from NIR or a PIO, except agricultural land, farmhouse and plantation
property.
There is no bar on inheritance of any immovable property
from person resident outside India, provided that person has acquired
the property in conformity with the regulations in force at that time or had
acquired such property from a person resident in India. He may also transfer
residential or commercial property in India
by way of gift to a person resident in India
or to a person resident outside India
who is a citizen of India or
to a person of Indian Origin resident outside India .
Repatriation of Sale
Prior
permission of the RBI is required to repatriate the sale proceeds of immovable
property outside India ,
by a NRI, or his successor. The authorized dealer is permitted to allow
repatriation of the sale proceeds of immovable property in India , outside India except agricultural,
plantation property or farmhouse to a NRI or to a PIO on following conditions:
1.
The acquisition of the immovable property by the seller
is in compliance with the law and
regulations in force.
2.
The property is sold after three years from the date of
acquisition or from the date of payment of final installment of sale price,
whichever is later.
3.
The amount to be repatriated does not exceed the amount
paid for acquisition in foreign exchange received through normal banking
channels or funds held in foreign currency Non-Resident account or equivalent
to foreign currency on the date of payment if acquired through Non-Resident external account.
4.
If the sale proceeds are from the residential property,
repatriation should not be more
than two properties.
5.
Authorized Dealers may allow to NRIs/PIOs the facility
of repatriation of funds out of
balances held in their Non-Resident Rupee (NRO) Accounts, subject to production of an
undertaking by the remitter and a certificate by
a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes (CBDT) (enclosed to A.P.
(DIR Series) Circular No.56 dated
November 26, 2002).
Prohibition on acquisition or
transfer of immovable property in India
There is a
complete prohibition against acquisition or transfer of immovable property in India by the citizens of Pakistan , Bangladesh ,
Sri Lanka , Afghanistan , China ,
Nepal and Bhutan without
the prior permission of the RBI. However, they may acquire or transfer
immovable property on lease, which should not be beyond five years.
Acquisition of Immovable Property
for permitted activities
Reserve Bank
of India has accorded
permission to the NRIs to acquire immovable property in India , for the purpose of carrying on business
or other activities in India
on the following conditions:
1. The
purpose is to open a branch or other place of business.
2. The
business or activity is established in India as per the Foreign Exchange
Management (Establishment in India of Branch or Offices or other place of
business) Regulation, 2000.
3. The
office is not a liaison Office.
4. There
is a need to acquire immovable property to carry on the activity.
5. There
is strict compliance of all applicable laws, rules, regulations and direction
in force.
6. The
person files Form No. II within ninety days from the date of such acquisition.
7. The
immovable property acquired can be transferred by way of mortgage to an authorized
dealer as security for any amount borrowed.
Housing loan in rupees to a Non-Resident:
NRI or a PIO
is eligible for a housing loan to acquire residential accommodation in India subject
to the following conditions:
1.
Loan to be availed from an authorized dealer or a
Housing Finance Institution approved by the National Housing Bank.
2.
Amount of loan, margin to be met and repayment period
will be as applicable to a person residing in India .
3.
The loan proceeds are not allowed to be credited to
Non-Residential External (NRE) / Foreign Currency Non-Resident (FCNR) /
Non-Resident non-repatriable account of the borrower.
4.
Loan should be fully secured. The acquired property
will; have to be given as security by equitable mortgage. If needed, other
assets of the borrower will have to be given by way of lien.
5.
The repayment of loan,
interest and other charges shall be by the borrower out of remittances outside India through
normal banking channels. This may be from the funds of the borrower in his
Non-Resident External (NRE) / Foreign Currency Non-Resident (FCNR) Non-Resident
Non-repatriable (NRNR)/Non-Resident-Ordinary (NRO) / Non-Residential Special
Rupee (NRSR) account in India .
The rental income of the property acquired may also be used for repayment.
6.
The interest charged to the loan shall be in conformity
with the RBI, National Housing Bank directives.
Investment in Local Funds
Reserve Bank
of India
grants permission to foreign citizens of Indian origin to invest in local funds
in real estate on submission of necessary applications provided such investments
are for bonafide use of residence.
If the
property is not immediately required for residential purpose, the same may be
leased out and the lease amount is repatriable.
Foreign
Citizens residing in India
are allowed to purchase one property for their bonafide residential purpose out
of their Rupee funds.
Investment by non-Indian origin
Foreign Citizens
Foreign
national of non-Indian origin may purchase immovable properties in India for their residential purpose out of fresh
remittance of foreign exchange through normal banking channels, with prior
approval of Reserve Bank of India .
The income out of investment is not repatriable. If any member of a Partnership
Firm, Trust, Association or Club is a Foreign Citizen the prior permission of
RBI is necessary for purchase of sale.
Foreign Companies / Banks
Any foreign
company other than Banking Companies are permitted to acquire / hold immovableproperties if they are needed for their business. They have to declare such
acquisition to the RBI.
Foreign
Companies who have only liaison office in India can also invest in
acquisition out of fresh remittance.
Foreign Embassies/ Diplomats/ Consulate
Generals
Foreign Embassy/
Diplomat/ Consulate General have been allowed to purchase/ Sell immovable
property in India other than agricultural land/ Plantation property/ Farm house
provided (i) Clearance from Government of India, Ministry of External Affairs
is obtained for such purchase/ sale, and (ii) the consideration for acquisition
of immovable property in India is paid out of funds remitted from abroad
through banking channel.
In compliance
with the mandatory conditions envisaged in the act discussed above, it is also
important and advisable to invest in the property free from any legal hassles,
which could validly and legally convey the ownership over the immovableproperty.
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