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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.