Real Estate For NRI

There are often doubts about acquiring property in India in the minds of Non Resident Indians (NRIs). Questions such as “Is it possible for me to apply for a loan from abroad” are bound to arise. Here, in this section, we have tried to considerably reduce the doubts by providing information on NRI investment rules in property, Acquisitions, Holding and documents required.

NRI Investment in the Indian Property Market

Defination

Indian citizens who stay abroad for employment or for carrying on business or vocation or for any other purpose in the circumstances indicating a definite intention to stay outside India for an indefinite period.
Indian citizens working abroad on assignment with Foreign Government or International Agencies
Officials of Central and State Government and Public Sector undertakings deputed abroad on temporary assignments or posted to their offices abroad
Indians who have settled abroad permanently or gone abroad on immigration. Non- resident Indians become residents of India when they return to India for employ ment or for carrying on any business or vocation or for any other purpose indi cating a definite intention to stay in India for an indefinite period. However, during their short visits to India for holidays or business, non-residents are not to be regarded as persons ordinarily resident in India.

Acquisition, Holding, etc. of Immovable Property in India by Certain Persons

11E.1 In terms of Section 31(1) of FERA 1973, persons who are not citizen of India(whether resident in India or not) and companies (other than banking companies) which are not incorporated under any law in force in India are required to obtain prior permission of Reserve Bank to acquire, hold, transfer or dispose of by sale, mortgage, lease, gift, settlement or otherwise any immovable property situated in India.

The work relating to the permission for acquisition etc. of immovable property is centralized in the Central Office of Reserve Bank (Foreign Investment Division) at Mumbai.

Notes:

The above restrictions do not apply to immovable property taken or given on lease for a period not exceeding five years.
Prior permission of Reserve Bank is necessary for acquisition, disposal etc. of flats in co-operative housing societies.
Nepalese or Bhutanese nationals, whether resident in India or not, as well as Nepalese companies in Bhutan should obtain, prior permission of Reserve Bank for acquisition, holding etc. of immovable property in India even though the transactions may be settled in Indian Rupees .
In case of partnership firms, if any of the partner is a Foreign citizen, the firm should obtain permission of Reserve Bank for acquisition /disposal of the immovable property. Likewise, if any member of the governing body of an association/organisation or any trustee of a trust is a Foreign citizen, such, a body/trustee should obtain Reserve Bank”s permission under Section 31(1) of FERA 1973
Acquisition, Sale etc. of Immovable Property by Foreign Banks

11E.2 The acquisition, sale ect. Of immovable properties in India by Foreign banks operating in India is governed by the relevant provisions of Banking Regulation Act,1949 and the policy of Reserve Bank in this regard in force from time to time. Foreign banks should ensure while undertaking such transactions in immovable property that they are in accordance with the provision of the Act and directions issued, in any, by the Department of Banking Operations and Development of Reserve Bank.

Application forms

11E.3 Application for fresh acquisition or holding of immovable property in India (other than those covered under the general permission granted by Reserve Bank) should be made to Reserve bank in form IPI 1 and for sale/transfer of property (other than tea, coffee, rubber, etc. plantation or those covered by general permissions granted by Reserve Bank) in form IPI 2. Application for sale/transfer of tea, coffee, rubber etc. plantation should, however, be made in form IPI 3 together with the particulars of productivity, income, etc. in form IPI 4.

General permission for Acquisition of Property for Carrying on Activities permitted by the Reserve Bank

11E.4. By its Notification No. FERA 1343/93-RB dated 26th April 1993, Reserve Bank has granted general permission to companies, (other than banking companies), which are not incorporated under any law in force in India, to acquire or hold activity permitted by Reserve Bank under Section 28 or Section 29 of FERA 1973. Companies which acquire or hold any immovable property in India in terms of the general permission are required to submit to Reserve Bank a declaration in form IPI 5 not later than 90 days from the date of acquisition of the immovable property.

Note: The above general permission does not apply to Foreign companies that have been permitted under Section 29 of the Act to open liaison offices or to post representatives in India.

Properties held at the commencement of the Act

11E.5 In terms of Section 31(4), properties held since prior to 1st January 1974 i.e. the date of coming into force of FERA 1973, were required to be declared to Reserve Bank. Applications for the purpose were required to be made in form IPI 6. Holding licences have been issued by Reserve Bank on the basis of declarations received by it in terms of this provision.

General Permission for Acquisition/Disposal of Residential/Commercial properties by Foreign Citizens of Indian origin

11E.6 (i) By its Notification No.FERA.152/93-RB dated 26th May 1993, Reserve Bank has granted general permission to Foreign citizens of Indian origin, (whether resident in India or not), to acquire and dispose of immovable properties (other than agricultural land/farm house/plantation property) situated in India subject to the fulfilment of the following conditions:

11E.6 (i) By its Notification No.FERA.152/93-RB dated 26th May 1993, Reserve Bank has granted general permission to Foreign citizens of Indian origin, (whether resident in India or not), to acquire and dispose of immovable properties (other than agricultural land/farm house/plantation property) situated in India subject to the fulfilment of the following conditions:
A) Acquisition/Disposal of Residential Property/ies in India other than by way of Gift
1.Property is acquired by way of purchase or inheritance for the person”s bonafide residential use and transferred by way of sale. (No restrictions are placed on the number of residential properties that can be acquired/disposed of under the general permission except what is mentioned against condition 6 below)
2.Consideration for the property purchased is met out of Foreign exchange remitted from abroad through normal banking channels of funds withdrawn from the purchaser”s NRE/FCNR account maintained with a bank in India.
3.Property purchased is not let out, except where it is not immediately required for the purchaser”s own residential use.
4.A declaration is submitted to Reserve Bank (Central Office) about such acquisition in form IPI-7 within a period of 90 days from such acquisition/final payment of purchase consideration along with a certified of the document evidencing the transaction and bank certificate regarding the consideration paid.
5.Income accruing by way of rent or sale proceeds of the property or income arising out of investment of such proceeds is credited to the person”s NRO account (if the property is held by a non-resident Foreign citizen of Indian origin) or to the Resident Rupee Account i.e. Q.A.22 Account )if the property is held by a Foreign citizen of Indian origin resident in India) with a bank in India.
6.In respect of residential properties purchased on or after 26th May 1993, Reserve Bank would consider applications for the repatriation of sale proceeds up to the consideration amount remitted in Foreign exchange for the acquisition of the property (only up to two such properties) provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later. Applications for the purpose should be made to Reserve Bank (Central Office) in form IPI 8 within 90 days of the sale of the property.
B) Acquisition/Disposal of Residential property by way of Gift
1.Properties (up to two houses) are acquired, transferred or disposed of by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin whether resident in India or not.
2.Gift tax, if any, has been paid.
C) Acquisition by way of purchase or inheritance or Disposal by way of Sale of commercial Property/ies in India
1.Property (not being agricultural land/farm house/plantation property) situate in India is acquired by way of purchase or inheritance and transferred or disposed of by way of sale (No restrictions are placed on the number of such properties acquired/disposed of under the general permission except what is mentioned against condition 4 below).
2.Consideration for the property purchased is met out of Foreign exchange remitted from abroad through normal banking channels or funds withdrawn from the purchaser”s NRE/FCNT account maintained with banks in India.
3.A declaration of submitted to Reserve bank (Central Office) about acquisition of the commercial property in form IPI-7 within a period of 90 days from such acquisition/final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.
4.Reserve Bank would consider applications for repatriation of original investment in commercial property in respect of properties purchased on or after 26th May 1993 up to the consideration amount remitted in Foreign exchange for the acquisition of the property provided the property is sold after a period of three years from the date of the final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later.
The balance amount of sale proceeds of the property/ies should be credited to the seller”s NRO account or Resident Rupee Account (Q.A. 22 Account) in the case of resident Foreign citizens maintained with a bank in India. Applications for repatriation of the amount should be made to Reserve Bank (Central Office) in form IPI-8 within 90 days of the sale of the property.
(ii) For the purpose of above general permission, a Foreign citizens is deemed to be of Indian origin if (a) he held an Indian passport at any time, or (b) he or his father or paternal grandfather was a citizen of India by virtue of the constitution of India or the citizenship Act, 1955 (57 of 1955) provided that the citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka and Nepal shall be deemed to be not of Indian origin.
(iii) Non-resident Indian nationals are also eligible for the facility regarding repatriation of sale proceeds of the properties referred in terms A.6 and C.4 above of sub-paragraph (i), provided the other conditions referred to in the said sub-paragraph are satisfied.