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Who can purchase immovable property in India?
Under the general permission available, the following categories can purchase immovable property in India:
i) Non-Resident Indian (NRI)
ii) Person of Indian Origin (PIO)
The general permission, however, covers only purchase of residential and commercial property and is not available for purchase of agricultural land / plantation property / farm house in India.
Who is Non Resident Indian?
A person residing outside India who is a citizen of India or a person outside India who is of Indian origin is an NRI. The definition of Person resident outside India is defined under section 2(w) of Foreign Exchange Management Act, 1999 as “a person who is not resident in India”
A person shall be deemed to be a person not resident in India in the following cases:-
When the person stays in India for less than or up to 182 days during the preceding financial year
When a person who has gone out of India or who stays outside India, in either case –
for or on taking up employment outside India, or
for carrying on outside India a business or vocation outside India, or
for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period.
Who is a person of Indian origin?
The definition of ‘Person of Indian Origin’ is defined under section 2 (b) of Foreign Exchange Management (borrowing and lending in rupees) Regulations, 2000 and under section 2 (xii) of Foreign Exchange Management (Deposit) Regulations, 2000 as given under:-
“Person of Indian Origin’ means a citizen of any country other than Bangladesh or Pakistan, if
he at any time held an Indian passport; or
he or either of his parents or any of his grandparents was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955); or
the person is a spouse of an Indian citizen or a person referred to in sub-clause (a) or (b)”
Person of Indian Origin (PIO) for the purpose of acquiring immovable property in India as given under:-
“Person of Indian origin’ means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who at any time, held an Indian passport; or
who or either of whose father or mother or whose grandfather or grandmother was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955)”
Can a foreign national who is a person resident in India purchase immovable property in India?
Yes, a foreign national who is a ‘Person Resident in India’ within the meaning of Section 2(v) of FEMA, 1999 can purchase immovable property in India, but the person concerned would have to obtain the approvals and fulfill the requirements, if any, prescribed by other authorities, such as, the State Government concerned, etc. The onus to prove his/her residential status is on the individual as per the extant FEMA provisions, if required by any authority. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of the Reserve Ban
Are there any formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission?
They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration alongwith a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.
In what manner the purchase consideration for the residential immovable property should be paid by foreign citizens of Indian origin under the general permission?
The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India.
Can NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds?
Yes, NRI/PIO can rent out the property without the approval of the Reserve Bank. The rent received can be credited to NRO / NRE account or remitted abroad. Powers have been delegated to the Authorised Dealers to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/PIO who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.
Are any documents required to be filed with the Reserve Bank after the purchase?
An NRI / PIO, who has purchased residential / commercial property under general permission, is not required to file any documents/reports with the Reserve Bank.
How can an NRI / PIO make payment for purchase of residential / commercial property in India?
Payment can be made by NRI / PIO out of:
funds remitted to India through normal banking channels or
funds held in NRE / FCNR (B) / NRO account maintained in India
No payment can be made either by traveler’scheque or by foreign currency notes or by other mode except those specifically mentioned above.
Does the Agreement of Sale have to be registered?
In many states in India, the Agreement of Sale between the builder and purchaser is required by law to be registered. You are advised in your own interest to lodge the agreement for registration within four months of the date of the Agreement at the office of the Sub Registrar appointed by the State Government, under the Indian Registration Act, 1908
Can NRI / PIO avail of loan from an authorised dealer for acquiring flat / house in India for his own residential use against the security of funds held in his NRE Fixed
Deposit account / FCNR (B) account? How the loan can be repaid?
Yes, such loans are permitted subject to the terms and conditions laid down by RBI. Such loans can be repaid in the following manner:
by way of inward remittance through normal banking channel or
by debit to the NRE / FCNR (B) / NRO account of the NRI/ PIO or
out of rental income from such property
by the borrower’s close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower’s loan account.
Can housing loan of NRI / PIOs be repaid by close relatives of the borrower in India?
Housing Loan in rupees availed of by NRIs/ PIOs from Housing Financial Institutions in India can be repaid by the close relatives in India of the borrower
Can sale proceeds of such property if and when sold be remitted out of India?
In respect of residential properties purchased on or after 26th May 1993, Reserve Bank considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of the property for two such properties. The balance amount of sale proceeds if any or sale proceeds in respect of properties purchased prior to 26th May 1993, will have to be credited to the ordinary non-resident rupee account of the owner of the property.
Who can apply for a housing loan?
Anyone, including Non Resident Indians, with a steady source of incomecan borrow funds for financing the cost of a flat from housing finance companies and banks.
What is an EMI?
Equated Monthly Installment (EMI) is the amount comprising a portion of the interest and the principal loan amount which is payable by a borrower to the lender every month.
What is a fixed rate housing loan?
A fixed rate housing loan is a loan where the rate of interest is constant through the entire term of the loan.
What is a floating interest rate housing loan?
A floating interest rate housing loan is a loan where the interest rate payable is linked to market conditions such as the lender bank’s retail Prime Lending Rate (PLR). A floating interest rate fluctuates as the bank rate varies. Floating interest rates are generally lower than fixed interest rates.
Do institutions accept joint loan applications?
Yes
What are the documents required to apply for a housing loan?
Photographs
Proof of age
Identity papers
Proof of residence
Bank statements for the previous six months
Latest salary slip (proof of income for salaried individuals)
For self-employed: Certified copies of balance sheet, profit and loss statement and tax challans / tax returns for the previous 3 years.
For partnership /private limited companies: The Articles of Association, partnership deed and details about the firm.
For NRIs:
- Latest salary certificate specifying, name (as it appears in the passport)
- Date of joining
- Passport number
- Designation
- Perquisites and salary
- Photocopy of labour card/identity card
- Photocopy of valid resident visa stamped on the passport
- Photocopy of monthly statement of local bank account
- Property related documents
Which sources, other than housing finance companies offer loans?
Banks and insurance companies. You can avail loan against your Provident Fund Account, Fixed Deposits, Post office Savings; against shares and debentures of listed companies and government bonds and securities.
What is a Home Extension Loan?
A Home Extension Loan is a loan which helps you to meet the expenses of alterations like extension / expansion or modification of your home. You can avail of a Home Extension Loan after obtaining the requisite approvals from the Municipal Corporation.
What is a Home Improvement Loan?
A Home Improvement Loan is one that is made available for you to carry out certain external work like structural repairs, waterproofing or internal work like tiling and flooring, plumbing, electrical work, painting, etc.
How is the rate of interest calculated in India?
Interest rates vary from time to time and from institution to institution. The current trend ranges from about 10% to 11% pa. The interest calculated either on a daily or monthly reducing or yearly reducing balance.
What are the repayment period options?
Repayment period options range generally from 5 to 30 years.
What are the charges for availing a housing loan?
Processing Fees: payable to the lender on applying for a loan and is either a fixed amount not linked to the loan or may also be a percentage of the loan amount. Commitment Fees: in case the loan is not availed of within a stipulated period of time after it is processed and sanctioned then some institutions levy a commitment fee. Stamp duty and registration fee on a deed of mortgage. Miscellaneous costs: such as administrative costs, legal documentation charges, technical consultant charges.
What security is required for a housing loan?
The flat purchased is the primary security and is mortgaged to the lending institution till the entire loan is repaid. Additional security such as life insurance policies, shares, bonds, fixed deposit receipts, national savings certificates can also be offered, as per the requirements of the institution.
What is the time required for disbursement of loans?
Usually loans are disbursed within 7 days after completion of verification by the institution, documentation (such as handing over of the original agreement for sale / lodging receipt to the lender) and completion of all relevant procedures and only after proof that the borrower’s own contribution has been paid by him to the Vendor / Builder / Developer.
Security required for housing loan?
The flat purchased is the primary security and is mortgaged to the lending institution till the entire loan is repaid. Additional security such as life insurance policies, shares, bonds, fixed deposit receipts, national savings certificates can also be offered, as per the requirements of the institution.
What is Registration of Property Documents?
Registration is the process of recording a copy of a document, transferring the title in immovable property to the office of the Registrar. Registration acts as proof that a transaction has taken place. The registration of a document serves as a notice of the transaction, to the persons affected by the transaction. Registration also serves as an implied notice to any person subsequently acquiring interest in the property, covered by the registered document. When a document, which is compulsorily to be registered, is not registered, it fails to confer any title given by the document. The real purpose of registration is to ensure that every person dealing with property for which compulsory registration is required, can confidently rely on the statement contained in the register, as being a full and complete account of all transactions by which the title may be affected. A certificate of Registration is mere evidence that a document has been registered. It is not proof that it has been executed. When the execution of a document is directly in dispute between two parties, the fact that the document is registered is not sufficient to prove its genuineness. Registration does not automatically dispense with the necessity of independent proof that the document was executed. Registration is done after the parties execute the document. The agreement should be registered with the Sub-Registrar of Assurance under the provisions of the Indian Registration Act, 1908 within four months from the date of execution of the document. However, if due to any unavoidable circumstances, the document is not registered within the time limit, then the document can be registered only on making an application to the Sub-Registrar of Assurance within a further period not exceeding four months and on payment of appropriate fine.
Is registration compulsory for all types of transfer of immovable properties?
Except in case of transfer of shares of a co-operative housing society and housing limited company where registration is optional, virtually in all cases of transfer of immovable property like family arrangement, agreement to sell, conveyance, gift deed, lease deed (above one year), leave and license agreement, tenancy agreement, declaration deed, power of attorney to sell for consideration etc. has to be registered compulsorily under Indian Registration Act,1908 otherwise the proper legal title will not pass on to the purchaser/transferee i.e. the title will be defective if registration is not done.
In what languages should the document be written so that it can be registered in Mumbai?
It should be normally be written is English, Hindi, Marathi and Gujarati only.
If any person who has executed the document is unable to come to sub- registrar office on medical grounds, then what should he do?
In case a person is unable to attend the office of the sub-registrar on medical grounds, then he should apply to the sub-registrar through a duly authorized representative stating the fact. The sub-registrar is bound to visit such person after office hours i.e. morning 9.00 a.m. to 10.00 a.m. and in the evening 5.00pm to 6.00 pm. That person shall admit in execution in presence of that sub- registrar, affix his photograph and sign and put his thumb impression on the document. The sub-registrar will take the document with him and complete all the formalities and process of registration.
The benefits of taking a home loan the income tax authorities look with favor upon those servicing a housing loan from specified financial institutions. And, it is up to you to be wise enough to take advantage of this.
Section 24 of the Income Tax Act
Interest paid on capital borrowed for the acquisition, construction, repair, renewal or reconstruction of property is entitled to a deduction. That means you are allowed to deduct an amount equivalent to the total interest payable on the housing loan from your taxable income within the same financial year.
This is now a substantial amount. It started off with the Income Tax Department offering Rs 15,000 as the maximum amount eligible for deduction in the case of self-occupied property. This later got doubled to Rs 30,000. It did not stop there. After getting enhanced to Rs 75,000, it was then taken to a limit of Rs 1 lakh. Presently, the limit stands elevated to Rs 1.5 lakh.
So, should you borrow money to acquire, construct, repair, renew or reconstruct property on or after April 1, 1999, you get a deduction of up to Rs 1.5 lakh. The criteria being: the property has to be acquired or constructed by March 31, 2003 and be self-occupied.
Section 80C of the Income Tax Act.
A deduction u/s 80C (2) (xviii) is available on repayment of principal during a financial year up to Rs. 1,00,000/-, this aforesaid limit is within the overall limit of Rs 1 lakh specified in section 80C of the Income Tax Act. Stamp duty, registration fee or other such expenses paid for the purpose of transfer of such house property to the assessee is also considered under this amount. This deduction is from Gross Total Income.
