Acquisition and Transfer of Immovable
Property in India by Non-Resident Indians (NRIs) and persons of Indian Origin:
Various
countries regulate the transactions in immovable property by their
Non-Residents and persons of its origin with certain restrictions because such
transactions have considerable impact on the economy.
In
our country, earlier, the Foreign Exchange Regulation Act 1973 (FERA) was
regulating transactions in immovable property by Non-Resident Indians and
persons of Indian origin. This is 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 Non-Resident Indians and persons of Indian
origin and the guidelines dated 3-5-2000 stipulated by RBI called Foreign
Exchange Management (Acquisition and Transfer of Immovable Property in India)
Regulations 2000 came into force from 01-06-2000.
Any acquisition
/ transfer of immovable property in India other than detailed below requires
RBI prior approval. Those Guidelines refers to the acquisition of immovable
property in India by Indian citizens residing outside India and persons of
Indian origin residing outside India.
FEMA
defines a person residing outside India as a person who is not a residing in
India, this category includes
1 Indian
citizens who reside outside for employment carrying on any business, vocation
or any other purpose indicating indefinite 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 for temporary assignments or posted to their offices. This
includes Indian diplomatic missions.
An
Indian citizen who goes abroad on student visa and takes up appointment on
completion of studies will be regarded as a person residing outside India only
from the time they take the job abroad.
Non-Resident
Indians are not regarded as residents in India during their short visits to
India for holidays, business, etc.
A
person of Indian origin means a person at any time holding Indian passport or
who or either of whose father, grandfather was a citizen of India, by virtue of
Constitution of India or Citizenship Act 1955. However, citizens of Pakistan.
Bangladesh. Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, does not fit
into this category.
Acquisition/
Transfer of Immovable Property by an Indian citizen residing outside India:
Indian citizens
residing outside India are prohibited from acquiring, agricultural,
plantation property and farmhouse and also from transferring agricultural,
plantation property, farmhouse to a person residing outside India, who is a
citizen of India, or to a person of Indian origin residing outside India. They
may acquire any immovable property in India and transfer property other than
agricultural, plantation, farmhouse to a person outside India, who is an Indian
citizen or a person of Indian origin residing outside India.
They
can transfer any immovable property to a person residing in India, including
agricultural, plantation property, and farmhouse.
Acquisition/
transfer of immovable property in India by a person of Indian origin residing
outside India:
A
person of Indian origin, residing outside India cannot acquire agricultural
plantation property farmhouse but acquire any other immovable property.
However, such an acquisition must be out of the funds received in India by way
of inward remittances from outside India, or from the fund of Non-Resident
account maintained in compliance of FEMA Act and RBI regulations.
He
is also permitted to accept the immovable property except agricultural,
plantation property, farmhouse as a Gift from a resident in India; an Indian
citizen residing outside India; a person of Indian origin residing outside
India. He is also entitled to inherit any immovable property from a person
residing outside India, provided that a person residing outside India has
acquired such immovable property as per the provision of law in force at that
time.
He
is also permitted to inherit the immovable property from a person residing in
India.
He
is not permitted to transfer by way of sale the agricultural, plantation
property farmhouse to persons residing in India but can transfer other
immovable property by way of sale.
However,
restrictions on transfer by way of sale or gift of agricultural, plantation property
farmhouse does not apply if it is transferred to a person residing in India who
is a citizen of India.
He
is permitted to transfer a residential or commercial property as a gift to a
person residing in India or to an Indian citizen residing outside India, or to
a person of Indian origin residing outside India.
Repatriation
of Sale Proceeds:
Prior
permission of Reserve Bank of India is required to repatriate the sale proceeds
of immovable property outside India, by a person residing outside India, or his
successor. The authorized dealer is permitted to allow repatriation of the sale
proceeds of immovable property in India except agricultural plantation property
farmhouse outside India to an Indian citizen residing outside India or to a
person of Indian origin on following conditions.
1.
The acquisition of the immovable property by the
seller was in compliance of law and regulations in force.
2. The property was
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 of residential property repatriation should not be more
than two properties.
There
is 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 Reserve Bank of India.
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 a person residing outside India 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
the activities is established in India as per Foreign Exchange Management (Establishment in India of
Branch or Offices or
other place of business) Regulation 2 000.
3. The office is
not a Liaison Office.
4. There is
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. IPI within
ninety days from the date of such acquisition.
7. The
immovable property acquired is transferred by way of mortgage to an authorized
dealer as security for any amount borrowed.
Housing
loan in rupees to a Non-Resident
Non-Resident
Indian or a person of Indian Origin residing outside India is eligible to a
housing loan to acquire residential accommodation in India subject to the
following conditions:
1.
Loan to be availed from an authorized dealer or
Housing Finance Institution approved by 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 to be given by way of lien.
5.
The repayment of loan, interest and other
charges shall be by the borrower from 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 RBI National Housing Bank directives.
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