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NRI helpdesk

Acquisition of Immovable Property in India

Q.1.     Who can purchase immovable property in India?

            A. 1 Under the general permission available, the following categories can freely purchase             immovable property in India:

            i)   Non-Resident Indian (NRI)- that is a citizen of India resident outside India
            ii)  Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or                  Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who

            1. at any time, held Indian passport, or 
            2. who or either of whose father or grandfather was a citizen of India by virtue of the Constitution             of India or the Citizenship Act, 1955 (57 of 1955).
            The general permission, however, covers only purchase of residential and commercial property and             not for purchase of agricultural land / plantation property / farm house in India. 

Q.2.      Whether NRI/PIO can acquire agricultural land/ plantation property / farm house in India?

             A.2. No. Since general permission is not available to NRI/PIO to acquire agricultural land/             plantation property / farm house in India, such proposals will require specific approval of Reserve             Bank and the proposals are considered in consultation with the Government of India.

Q.3.     Do any documents need to be filed with Reserve Bank of India after purchase?
            A.3. No.  An NRI / PIO who has purchased residential / commercial property under general             permission,is not required to file any documents with the Reserve Bank.

Q.4.      How many residential / commercial properties can NRI / PIO purchase under the general              permission?

             A.4. There are no restrictions on the number of residential / commercial properties that can be             purchased.

Q.5.     Can a foreign national of non-Indian origin be a second holder to immovable property             purchased by NRI / PIO?

            A.5. No.

Q.6.      Can a foreign national of non-Indian origin resident outside India purchase immovable             property in India?

            A.6. No. A foreign national of non-Indian origin, resident outside India cannot purchase any             immovable property in India. But, he/she may take residential accommodation on lease provided             the period of ease does not exceed five years. In such cases, there is no requirement of taking any             permission of or reporting to Reserve Bank 

Q.7       Can a foreign national who is a person resident in India purchase immovable property in             India?

            A.7. Yes, but the  person concerned would have to obtain  the approvals, and fulfil the             requirements if any, prescribed by other authorities, such as the concerned State Government, etc              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 Reserve Bank. Such             requests are considered by Reserve Bank in consultation with the Government of India.

Q.8       Can an office of a foreign company purchase immovable property in India? 

            A.8. A foreign company which has established a Branch Office or other place of business in India, in             accordance with FERA / FEMA regulations, can  acquire any immovable property in India, which is             necessary for or incidental to carrying on such activity. The payment for acquiring such a property             should be made by way of foreign inward remittance through proper banking channel. A declaration             in form IPI should be filed with Reserve Bank within ninety days from the date of acquiring the             property. Such a property can also be mortgaged with an Authorised Dealer as a security for other             borrowings. On winding up of the business, the sale proceeds of such property can be repatriated             only with the prior approval of Reserve Bank. Further, acquisition of immovable property by             entities who had set up  Branch Offices in India and incorporated in Pakistan, Bangladesh, Sri             Lanka, Afghanistan, China, Iran,  Nepal and Bhutan would require prior approval of Reserve Bank to             acquire such immovable property.  However, if the foreign company has  established a Liaison             Office, it can not acquire immovable property . In such cases, Liaison Offices, can take property by             way of lease not exceeding 5 years. 

Q.9       Whether immovable property in India can be acquired by way of gift ?

             A.9. (a)  Yes, NRIs and  PIOs can freely acquire immovable property by way of gift either  from

            i) a person resident in India or
            ii) an NRI  or
            iii) a PIO.

            However, the property can only be commercial or residential. Agricultural land / plantation property             / farm house in India cannot be acquired by way of gift.

            (b) A foreign national of non-Indian origin resident outside India cannot acquire any immovable              property in India through gift.

Q.10.    Whether a non-resident can inherit immovable property in India?

            A.10. Yes, a person resident outside India i.e.

            i) an NRI
            ii) a PIO and
            iii) a foreign national of non-Indian origin can inherit and hold immovable property in India from a             person who was resident in India. However, a citizen of Pakistan, Bangladesh, Sri Lanka,             Afghanistan, China, Iran, Nepal and Bhutan should seek specific approval of Reserve Bank.

Q.11.   From whom can  the non-resident  inherit immovable property?

             A.11. A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can             inherit immovable property from

            (a) a person resident in India.
            (b) a person resident outside India

            However, the person from whom the property is inherited should have acquired the same in             accordance with the foreign exchange regulations applicable at that point of time.

            II. Transfer of immovable property in India 
            (i) Transfer by Sale

Q.12     Can an NRI/ PIO/foreign national sell his residential / commercial property?

            A.12. (a)  NRI can sell property in India to-

            i)   a person resident in India or
            ii)  an NRI or
            iii) a PIO.

            (b)  PIO can sell property in India to

            i) a person resident in India.
            ii) an NRI or
            iii) a PIO –  with the  prior approval of Reserve Bank

            (c ) Foreign national of non-Indian origin including a citizen of Pakistan or Bangaladesh or Sri Lanka             or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of             Reserve Bank to

            i)  a person resident in India
            ii) an NRI
            iii) a PIO

Q.13.   Can an agricultural land / plantation property / farm house in India owned / held by a             non-resident  be sold?

            A.13.  (a)  NRI / PIO may sell agricultural land /plantation property/farm house to a person resident             in India who is a citizen of India.

            (b)  Foreign national of non-Indian origin resident outside India would need prior approval of             Reserve Bank to sell agricultural land/plantation property/ farm house in India

            (ii) Transfer by gift

Q.14.    Can a non-resident gift his residential / commercial property?

            A.14. Yes.

            (a)  NRI / PIO may gift residential / commercial property to -

            (i) person resident in India or
            (ii) an NRI or
            (iii) PIO.
            (b)  foreign national of non-Indian origin needs prior approval of Reserve Bank.

Q.15.    Can an NRI / PIO / Foreign national holding an agricultural land / plantation property / farm             house in India gift the same?

            A.15. (a) NRI / PIO can gift but only  to a person resident in India who is a citizen of  India.

            (b) foreign national of non-Indian origin needs prior approval of Reserve Bank

            (iii) Transfer through mortgage

Q.16.    Can residential / commercial property be mortgaged?

            A.16. i) NRI / PIO can mortgage to:

            (a) an authorised dealer / housing finance institution in India – without the approval of Reserve             Bank.

            (b) a party abroad - with prior approval of Reserve Bank.

            ii) a foreign national of non-Indian origin can mortgage only with prior approval of Reserve Bank

            iii) a foreign company which has established a Branch Office or other place of business in             accordance with FERA/FEMA regulations has general permission to mortgage the property with an             authorized dealer in India.
            
III. Mode of payment for purchase

Q.17.   How can an NRI / PIO make payment for purchase of residential / commercial property
            in India ?


            A.17. Payment can be made by NRI / PIO out of
            (a) funds remitted to India through normal banking channel or

            (b) funds held in NRE / FCNR (B) / NRO account  maintained in India No payment can be made             either by traveller’s cheque or by foreign currency notes.
            No payment can be made outside India.

Q.18     What shall be the option if there is refund of application money / payment made by the             building agencies / seller because of non-allotment of flat / plot / cancellation of bookings /             contracts ?

             A.18. The amount of refund, together with interest (net of income tax) can be credited to NRE             account. This is subject to condition that the original payment was made by way of inward             remittance or by debit to NRE / FCNR (B) account.
            (Please refer to A.P. (DIR) Series Circular No. 46 dated 12.11.2002)

Q.19.    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?

            A.19. Yes, such loans are subject to the terms and conditions as laid down in Schedules 1 and 2 to             Notification No. FEMA 5/2000-RB dated May 3, 2000 as amended from time to time.  However,             banks cannot grant fresh loans or renew existing loans in excess of Rupees 20 lakh against NRE and             FCNR(B) deposits either to the depositors or to third parties
            [cf. A.P. (DIR Series) Circular No. 29 dated January 31, 2007].

            Such loans can be repaid 

            (a) by way of inward remittance through normal banking channel or

            (b) by debit to his NRE / FCNR (B) / NRO account or

            (c) out of rental income from such property.

            (d) 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. 

            Repatriation:

            (a) In case the amount has been received from inward remittance or debit to NRE/FCNR(B)/NRO             account for acquiring the property or for repayment of the loan, the principal amount can             be repatriated outside India.
            For this purpose, repatriation outside India means the buying or drawing of foreign exchange             from an authorised dealer in India and remitting it outside India through normal banking channels             or crediting it to an account denominated in foreign currency or to an account in Indian currency             maintained with an authorised dealer from which it can be converted in foreign currency

            (b) in case the property is acquired out of Rupee resources and/or the loan is repaid by close             relatives in India ( as defined in Section 6 of the Companies Act, 1956), the amount can be             credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale             of the property can also be credited to the NRO account.
            NRI/PIO are also allowed by the Authorised Dealers to repatriate an amount up to USD 1 million per             financial year out of the balance in the NRO account for all bonafide purposes to the satisfaction of             the authorised dealers, subject to tax compliance.

Q.20.    Can NRI / PIO, avail of housing loan in rupees from an authorised dealer or housing finance             institution in India approved by the National Housing Bank for purchase of residential             accommodation or for the purpose of repairs / renovation / improvement of residential             accommodation ? How can such loan be repaid?

            A.20. Yes, NRI/PIO can avail of housing loan in rupees from an Authorised Dealer or housing             finance institution subject to certain terms and conditions. (Please refer to Regulation 8             of Notification No. FEMA 4/2000-RB dated 3.5.2000 Such a loan can be repaid

            (a) by way of inward remittance through normal banking channel or

            (b) by debit to his NRE / FCNR (B) / NRO account or

            (c) out of rental income from such property.

            (d) 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.

Q.21.   Can NRI/PIO avail of housing loan in rupees from his employer in India?

            A.21. Yes, subject to certain terms and conditions (Please refer to Regulation 8A of 
Notification No. FEMA 4/2000-RB dated May 3, 2000
 and A.P. (DIR Series) Circular No.27 dated October 10, 2003).

IV Repatriation of sale proceeds of residential / commercial property purchased by NRI / PIO

Q.22.   Can NRI / PIO repatriate the sale proceeds of immovable property? If so, what are the terms?

           A.22.  NRI / PIO may repatriate the sale proceeds of immovable property in India 

           (a) If the property was acquired out of foreign exchange sources i.e. remitted through normal            banking channels / by debit to NRE / FCNR (B) account
           The amount to be repatriated should not exceed the amount paid for the property:

           1. in foreign exchange received through normal banking channel or 
           2. by debit to NRE account(foreign currency equivalent, as on the date of payment) or debit to FCNR            (B) account.

           Repatriation of sale proceeds of residential property purchased by NRI / PIO out of foreign exchange            is restricted to not more than two such properties.
           Capital gains, if any, may be credited to the NRO account from where the NRI/PIO may repatriate            an amount up to USD one million, per financial year, as discussed below. 

           (b) If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to USD            one million, per financial year, out of the balances held in the NRO account (inclusive of sale            proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to            the satisfaction of the Authorized Dealer bank and subject to tax compliance.

Q.23.  Can an NRI/PIO repatriate the proceeds in case the sale proceed was deposited in NRO account?

           A.23. From the NRO account, NRI/PIO may repatriate up to USD one million per financial year            (April-March), which would also include the sale proceeds of immovable property. 

Q.24.  If a Rupee loan was taken by NRI/PIO from Authorised Dealer or housing finance institution for            purchase of residential property can an NRI / PIO repatriate the sale proceeds of such            property?

           A.24. Yes, provided the loan has been subsequently repaid by remitting funds from abroad or by            debit to NRE/FCNR(B) accounts (Please see A.P. (DIR) Series Circular No. 101 dated 5.5.2003
  
Q.25.   If the property was purchased from foreign inward remittance or from NRE / FCNR (B)            account, can the sale proceeds of property be repatriated immediately?

           A.25. Yes.

Q.26.   Is there any restriction on number of residential properties in respect of which sale proceeds            can be repatriated by NRI / PIO?

           A.26. Yes, sale proceeds of not more than two residential properties can be repatriated.

Q.27.  If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate abroad            the funds from sale?

           A.27. The sale proceeds of immovable property acquired by way of gift should be credited to NRO            account only. From the balance in the NRO account, NRI/PIO may remit up to USD one million, per            financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.
  
Q.28    If the immovable property was received as inheritance by the NRI/PIO can he repatriate the            sale proceeds?

           A.28. Yes, general permission is available to the NRIs/PIO to repatriate the sale proceeds of the            immovable property inherited from a person resident in India. NRIs/PIO may repatriate an amount            not exceeding USD one million, per financial year, on production of documentary evidence in support            of acquisition / inheritance of assets, an undertaking by the remitter and certificate by a Chartered            Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular            No.10/2002 dated October 9, 2002.[cf. A. P. (DIR Series) Circular No.56 dated November 26,2002]. 
           In case of a foreign national, sale proceeds can also be repatriated even if the property is inherited            from a person resident outside India. But this is allowed only with prior approval of Reserve Bank.            The foreign national has to approach Reserve Bank with documentary evidence in support of            inheritance of the immovable property and the undertaking and the C.A. Certificate as mentioned            above.
           The general permission for repatriation of sale proceeds of immovable property is not available to a            citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran and he has to seek specific            approval of Reserve Bank.
           As FEMA specifically permits transactions only in Indian Rupees with citizens of Nepal and Bhutan,            the question of repatriation of the sale proceeds in foreign exchange to Nepal and Bhutan would not            arise.     

           V. Provisions for Foreign Embassies / Diplomats / Consulate Generals

Q.29.   Can Foreign Embassies / Diplomats / Consulate General purchase / sell immovable property in            India ?

           A.29. Yes, Foreign Embassies / Diplomats / Consulate Generals can purchase and sell any            immovable propertyother than agricultural land / plantation property / farm house in India with            prior clearance from the Government of India, Ministry of External Affairs. The payment should be            made by foreign inward remittance through normal banking channel.

           VI. Other issues

Q.30.   Can NRI / PIO rent out the residential / commercial property purchased out of foreign            exchange / rupee funds?

           A.30. Yes, NRI/PIO can rent out the property without the approval of the Reserve Bank. 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.
           [cf. A.P. (DIR Series) Circular No. 45 dated May 14, 2002].

Q.31.  Can a person who had bought immovable property when he was a resident, continue to hold            such property even after becoming an NRI/PIO?

           A. 31. Yes, he can continue to hold the residential / commercial property / agricultural land/            plantation property / farm house in India without the approval of the Reserve Bank.

Q. 32. In which account can the sale proceeds of such immovable property be credited ? 

           A.32. The sale proceeds may be credited to NRO account.

Q.33.  Can the sale proceeds of the immovable property referred to in Q.No. 31 be remitted abroad ?

           A.33. Yes, provided the amount to be remitted does not exceed USD one million per financial year,            for all bonafide purposes to the satisfaction of Authorised Dealers and subject to tax compliance.

Q.34.  Can foreign nationals of non-Indian origin resident in India or outside India who had earlier            acquired immovable property under FERA with specific approval of Reserve Bank continue to            hold the same?  Can they transfer such property?

           A.34. Yes, they may continue to hold the immovable property. However, they can transfer the            property only with the prior approval of Reserve Bank.

Q.35.  Is a resident in India governed by the provisions of Foreign Exchange Management (Acquisition            and transfer of immovable property in India) Regulations, 2000?

           A.35. A person resident in India who is a citizen of Pakistan or Bangladesh or Sri Lanka or            Afghanistan or China or Iran or Nepal or Bhutan is governed by the provisions of Foreign Exchange            Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 ie. he            would require prior approval of Reserve Bank for acquisition and transfer of immovable property in            India even though he is resident in India. Such requests are considered by Reserve Bank in            consultation with the Government in India

Definitions

Q.36.  Where are the terms a `person resident in India' and a`person resident outside India' defined ?

           A.36. Section 2 (v) and Section 2 (w) of the FEMA, 1999 defines `person resident in India' and a            `person resident outside India' respectively.

Q.37.  What is meant by a person resident in India ?

           A.37. Under FEMA, a person resident in India is defined as a person residing in India for more than            one hundred and eighty-two days during the course of the preceding financial year (April-March) and            who has come to or stays in India either for taking up employment, carrying on business or vocation            in India or for any other purpose, that would indicate his intention to stay in India for an uncertain            period. In other words, to be treated as `a person resident in India' under FEMA, a person has            not only to satisfy the condition of the period of stay (being more than 182 days during the            course of the preceding financial year) but has also to comply with the condition of the            purpose / intention of stay.

Q.38.  What is meant by a person resident outside India ?

           A.38. The Act defines a 'a person resident outside India' as a person who is not a person resident in            India' (As defined in Q.No. 37 above)

Q.39. Who can determine whether a person is resident in India or not? 

           A.39. Reserve Bank does not determine the residential status. Under FEMA, residential status is            determined by operation of law. The onus is on an individual to prove his / her residential status, if            questioned by any authority.

Q.40.   If a foreign national is a person resident in India as per the provisions of Section 2(v) (i)B of            the FEMA, 1999, does he require approval of Reserve Bank to purchase any immovable            property in India ?

           A.40  A foreign national resident in India  does not require approval from Reserve Bank from FEMA            angle, but approvals if any required in terms of regulations prescribed by other authorities such as            the concerned State Government etc. will have to be obtained by him / her. However, a foreign            national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China,            Iran, Nepal and Bhutan requires specific prior approval of Reserve Bank.



       

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