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Introduction
Acquisition of immovable property in India by
persons resident outside India (foreign national) is
regulated in terms of section 6 (3) (i) of the
Foreign Exchange Management Act (FEMA), 1999 as well
as by the regulations contained in the Notification
No. FEMA 21/2000-RB dated May 3, 2000, as amended
from time to time. Section 2 (v) and Section 2 (w)
of FEMA, 1999 defines `person resident in India' and
a `person resident outside India', respectively.
Person resident outside India is categorized as Non-
Resident Indian (NRI) or a foreign national of
Indian Origin (PIO) or a foreign national of
non-Indian origin. The 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.
A person resident in India who is not a citizen of
India is also covered by the relevant
Notifications.
1. In terms of the provisions of Section
6(5) of FEMA 1999, a person resident outside India
can hold, own, transfer or invest in Indian
currency, security or any immovable property
situated in India if such currency, security or
property was acquired, held or owned by such person
when he was a resident in India or inherited from a
person who was a resident in India.
2 The regulations under Notification No.
FEMA 21/2000-RB dated May 3, 2000, as amended from
time to time, permit a NRI or a PIO to acquire
immovable property in India, other than agricultural
land or, plantation property or farm house. Further,
foreign companies who have been permitted to open a
Branch or Project Office in India are also allowed
to acquire any immovable property in India, which is
necessary for or incidental to carrying on such
activity. Such dispensation is however not available
to entities which are permitted to open liaison
offices in India.
3. The restrictions on acquiring
immovable property in India by a person resident
outside India would not apply where the immovable
property is proposed to be acquired by way of a
lease for a period not exceeding 5 years or where a
person is deemed to be resident in India.
In order to be deemed to be a person resident in
India, from FEMA angle, the person would need to
comply with the provisions of Section 2(v) of FEMA
1999. The Press Release dated February 1, 2009
issued by Government of India in this regard is
enclosed as Annex.
Note: Citizens of Pakistan, Bangladesh, Sri Lanka,
Afghanistan, China, Iran, Nepal or Bhutan cannot
acquire or transfer immovable property in India,
(other than on lease not exceeding five years)
without the prior permission of the Reserve Bank.
4. NRIs/ PIOs are allowed to repatriate
an amount up to USD one million, per financial year
(April-March), out of the balances held in the
Non-Resident (Ordinary) Rupee (NRO) account, subject
to compliance with applicable tax requirements. This
amount includes sale proceeds of assets acquired by
way of inheritance or settlement.
FAQs
1. 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) – (NRI is a citizen
of India resident outside India).
ii) Person of Indian Origin (PIO)
PIO means an individual (not being a citizen of
Pakistan or Bangladesh or Sri Lanka or Afghanistan
or China or Iran or Nepal orBhutan) who
a.
at any time, held an Indian Passport or
b. 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).
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.
2. Can NRI/PIO acquire agricultural land/
plantation property / farm house in India?
No.
3. Are any documents required to be filed with the
Reserve Bank after the purchase?
No. An NRI / PIO who has purchased residential /
commercial property under general permission, is not
required to file any documents/reports with the
Reserve Bank.
4. How many residential / commercial properties can
NRI / PIO purchase under the general permission?
There are no restrictions on the number of
residential / commercial properties that can be
purchased.
5. Can a foreign national of non-Indian origin be a
second holder to immovable property purchased by NRI
/ PIO?
No.
6. Can a foreign national of non-Indian origin
resident outside India purchase immovable property
in India?
No. A foreign national of non-Indian origin,
resident outside India cannot purchase any immovable
property in India unless such property is acquired
by way of inheritance from a person who was resident
in India. However, he / she can acquire or transfer
immovable property in India, on lease, not exceeding
five years. In such cases, there is no requirement
of taking any permission of /or reporting to the
Reserve Bank.
7. 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 Bank.
8. Can the branch / liaison office of a foreign
company purchase immovable property in India?
A foreign company which has established a Branch
Office or other place of business in India, in
accordance with the Foreign Exchange Management
(Establishment in India of Branch or Office or other
Place of Business) Regulations, 2000, 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 the
proper banking channels. A declaration in form IPI
should be filed with the 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 the purpose of borrowings.
On winding up of the business, the sale proceeds of
such property can be repatriated only with the prior
approval of the Reserve Bank. Further, acquisition
of immovable property by entities incorporated in
Pakistan, Bangladesh, Sri Lanka, Afghanistan, China,
Iran, Nepal and Bhutan and who have set up Branch
Offices in India and would require prior approval of
the Reserve Bank.
However, if the foreign company has established a
Liaison Office in India, it cannot acquire immovable
property. In such cases, Liaison Offices can acquire
property by way of lease not exceeding 5 years.
9. Can a NRI/PIO acquire immovable property in India
by way of gift? Can a foreign national acquire
immovable property in India by way of gift?
(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 in nature. 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 by way of gift.
10. Can a non-resident inherit immovable property in
India?
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 prior approval of the Reserve
Bank for inheriting immovable property in India.
11. From whom can a non-resident person inherit
immovable property?
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 law in force or
FEMA regulations, applicable at the time of
acquisition of the property.
12. Can an NRI/ PIO/foreign national sell his
residential / commercial property?
(a) NRI can sell property in India to
1.
a person resident in India; or
2.
an NRI; or
3.
a PIO.
(b) PIO can sell property in India to
1.
a person resident in India; or
2.
an NRI; or
3.
a PIO – with the prior approval of the
Reserve Bank
(c) Foreign national of non-Indian origin including
a citizen of Pakistan or Bangladesh or Sri Lanka or
Afghanistan or China or Iran or Nepal or Bhutan can
sell property in India with prior approval of the
Reserve Bank to
1.
a person resident in India
2.
an NRI
3.
a PIO
13. Can a non-resident owning / holding an
agricultural land / a plantation property / a farm
house in India sell the said property?
(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 the
Reserve Bank to sell agricultural land/plantation
property/ farm house in India.
14. Can a non-resident gift his residential /
commercial property?
Yes.
(a) NRI / PIO may gift residential /
commercial property to –
(i) person resident in India or
(ii) an NRI or
(iii) PIO.
(b) A foreign national of non-Indian
origin requires the prior approval of the Reserve
Bank for gifting the residential / commercial
property.
15. Can an NRI / PIO / foreign national holding an
agricultural land / a plantation property / a farm
house in India, gift the same?
(a) NRI / PIO can gift an agricultural land / a
plantation property / a farm house in India only to
a person resident in India who is a citizen of
India.
(b) A foreign national of non-Indian origin would
require the prior approval of the Reserve Bank to
gift an agricultural land / a plantation property /
a farm house in India.
16. Can residential / commercial property be
mortgaged by NRI/ PIO?
i) NRI / PIO can mortgage a residential
/ commercial property to:
(a) an Authorised Dealer / the housing
finance institution in India without the approval of
Reserve Bank
(b) a bank abroad, with the prior approval
of the Reserve Bank.
ii) A foreign national of non-Indian
origin can mortgage a residential / commercial
property only with prior approval of the 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 Authorised Dealer in India.
17. How can an NRI / PIO make payment for purchase
of residential / commercial property in India?
Payment can be made by NRI / PIO out of:
(a) funds remitted to India through normal
banking channels 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 or by other mode except
those specifically mentioned above.
18 Is repatriation of application money for booking
of flat / payment made to the builder by NRI/ PIO
allowed when the flat or plot is not allotted or the
booking / contract is cancelled?
The Authorised Dealers can allow NRIs / PIOs to
creditrefund of application/ earnest money/ purchase
consideration made by the house building agencies/
seller on account of non-allotment of flat/ plot/
cancellation of bookings/ deals for purchase of
residential, commercial property, together with
interest, if any, net of income tax payable thereon,
to NRE/FCNR account, provided, the original payment
was made out of NRE/FCNR account of the account
holder or remittance from outside India through
normal banking channels and the Authorised Dealer is
satisfied about the genuineness of the transaction.
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? How the loan can be repaid?
Yes, such loans are permitted subject to the terms
and conditions laid down in Schedules 1 and 2 to the
Notification No. FEMA 5/2000-RB dated May 3, 2000
viz. Foreign Exchange Management (Deposit)
Regulations, 2000, as amended from time to time.
Banks cannot grant fresh loans or renew existing
loans in excess of Rs. 100 lakhs against NRE and
FCNR (B) deposits, either to the depositors or to
third parties. The banks should also not undertake
artificial slicing of the loan amount to circumvent
the ceiling of Rs.100 lakh.
Such loans can be repaid in the following manner:
(a) by way of inward remittance through
normal banking channel or
(b) by debit to the NRE / FCNR (B) / NRO
account of the NRI/ PIO 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
20. Can NRI / PIO, avail of housing loan in Rupees
from an Authorised Dealer or a 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?
Yes, NRI/PIO can avail of housing loan in Rupees
from an Authorised Dealer or a Housing Finance
Institution subject to certain terms and conditions
laid down in Regulation 8 of Notification No. FEMA
4/2000-RB dated May 3, 2000 viz. Foreign Exchange
Management (Borrowing and lending in rupees)
Regulations, 2000, as amended from time to time.
Authorised Dealers/ Housing Finance Institutions can
also lend to the NRIs/ PIOs for the purpose of
repairs/renovation/ improvement of residential
accommodation owned by them in India. Such a loan
can be repaid (a) by way of inward remittance
through normal banking channel or (b) by debit to
the NRE / FCNR (B) / NRO account of the NRI / PIO or
(c) out of rental income from such property; or (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.
21. Can NRI/PIO avail of housing loan in Rupees from
his employer in India?
Yes, subject to certain terms and conditions given
in 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, i.e.,
(i)
The loan shall be granted only for
personal purposes including purchase of housing
property in India;
(ii) The loan shall be granted in
accordance with the lender’s Staff Welfare
Scheme/Staff Housing Loan Scheme and subject to
other terms and conditions applicable to its staff
resident in India;
(iii) The lender shall ensure that the loan
amount is not used for the purposes specified in
sub-clauses (i) to (iv) of clause (1) and in clause
(2) of Regulation 6 of Notification
No.FEMA.4/2000-RB dated May 3, 2000.
(iv) The lender shall credit the loan
amount to the borrower’s NRO account in India or
shall ensure credit to such account by specific
indication on the payment instrument;
(v) The loan agreement shall specify that
the repayment of loan shall be by way of remittance
from outside India or by debit to NRE/NRO/FCNR
Account of the borrower and the lender shall not
accept repayment by any other means.
22. Can NRI / PIO repatriate outside India the sale
proceeds of immovable property held in India?
(a) In the event of sale of immovable
property other than agricultural land / farm house /
plantation property in India by a NRI / PIO, the
Authorised Dealer may allow repatriation of the sale
proceeds outside India, provided the following
conditions are satisfied, namely:
(i)
the immovable property was acquired by the
seller in accordance with the provisions of the
foreign exchange law in force at the time of
acquisition by him or the provisions of these
Regulations;
(ii) the amount to be repatriated does not
exceed:
·
the amount paid for acquisition of the immovable
property in foreign exchange received through normal
banking channels, or
·
the amount paid out of funds held in Foreign
Currency Non-Resident Account, or
·
the foreign currency equivalent (as on the date of
payment) of the amount paid where such payment was
made from the funds held in Non-Resident External
account for acquisition of the property; and
(iii) in the case of residential property,
the repatriation of sale proceeds is restricted to
not more than two such properties.
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
/ sale proceeds of assets by way of purchase / the
assets in India acquired by him by way of
inheritance / legacy. This is subject to production
of documentary evidence in support of acquisition,
inheritance or legacy of assets by the remitter, and
a tax clearance / no objection certificate from the
Income Tax Authority for the remittance.
Remittances exceeding US $ 1,000,000 (US Dollar One
million only) in any financial year requires prior
permission of the Reserve Bank.
(c) A person referred to in sub-section
(5) of Section 6 of the Foreign Exchange Management
Act3 , or his successor shall not, except with the
prior permission of the Reserve Bank, repatriate
outside India the sale proceeds of any immovable
property referred to in that sub-section.
23. Can an NRI/PIO repatriate the proceeds in case
the sale proceeds were deposited in the NRO account?
Please refer to the answer at Q.22 above. NRI/PIO
may repatriate up to USD one million per financial
year (April-March) from their NRO account which
would also include the sale proceeds of immovable
property. There is no lock in period for sale of
immovable property and repatriation of sale proceeds
outside India.
24. If a Rupee loan was taken by the NRI/ PIO from
an Authorised Dealer or a Housing Finance
Institution for purchase of residential property can
the NRI / PIO repatriate the sale proceeds of such
property?
Yes, Authorised Dealers have been authorised to
allow repatriation of sale proceeds of residential
accommodation purchased by NRIs/ PIOs out of funds
raised by them by way of loans from the authorised
dealers/ housing finance institutions to the extent
such loan/s repaid by them are out of the foreign
inward remittances received through normal banking
channel or by debit to their NRE/FCNR accounts. The
balance amount, if any, can be credited to their NRO
account and the NRI/PIO may repatriate up to USD one
million per financial year (April-March) subject to
payment of applicable taxes from their NRO account
balances which would also include the sale proceeds
of the immovable property.
25. If the immovable property was acquired by way of
gift by the NRI/PIO, can he repatriate abroad the
funds from sale of such property?
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.
26. If the immovable property was received as
inheritance by the NRI/PIO can he repatriate the
sale proceeds?
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
subject to the following conditions:
(i) The
amount should not exceed USD one million, per
financial year
(ii)
This is subject to production of documentary
evidence in support of acquisition / inheritance of
assets and 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.4/2009 dated June 29, 2009
(iii)
In cases of deed of settlement made by either
of his parents or a close relative (as defined in
section 6 of the Companies Act, 1956) and the
settlement taking effect on the death of the settler
(iv)
the original deed of settlement and a tax
clearance / No Objection Certificate from the
Income-Tax Authority should be produced for the
remittance
(v)
Where the remittance as above is made in more
than one installment, the remittance of all such
installments shall be made through the same
Authorised Dealer
(vi)
In case of a foreign national, sale proceeds
can be repatriated if the property is inherited from
a person resident outside India with the prior
approval of the Reserve Bank. The foreign national
has to approach the Reserve Bank with documentary
evidence in support of inheritance of the immovable
property and the undertaking and the C.A.
Certificate 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 the Reserve Bank.
As FEMA, 1999 specifically permits transactions only
in Indian Rupees with citizens of Nepal and Bhutan.
Therefore, the question of repatriation of the sale
proceeds in foreign exchange to Nepal and Bhutan
would not arise.
27. Can Foreign Embassies / Diplomats / Consulates
General purchase / sell immovable property in India?
In terms of Regulation 5A of the Foreign Exchange
Management (Acquisition and Transfer of Immovable
Property in India) Regulations 2000, Foreign
Embassies/ Diplomats/ Consulates General, may
purchase/ sell immovable property (other than
agricultural land/ plantation property/ farm house)
in India provided –
(i)
Clearance from the Government of India,
Ministry of External Affairs has been obtained for
such purchase/sale; and
(ii) The consideration for acquisition of
immovable property in India is paid out of funds
remitted from abroad through the normal banking
channels.
28. 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.
29. Can a person who had bought immovable property,
when he was a resident, continue to hold such
property even after becoming an NRI/PIO?
Yes, a person who had bought the residential /
commercial property / agricultural land/ plantation
property / farm house in India when he was a
resident, continue to hold the immovable property
without the approval of the Reserve Bank even after
becoming an NRI/PIO.
30. In which account can the sale proceeds of such
immovable property be credited ?
The sale proceeds may be credited to NRO account of
the NRI /PIO.
31. Can the sale proceeds of the immovable property
referred to in Q.No. 29 be remitted abroad ?
Yes, 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.
32. 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 the Reserve Bank continue to hold the
same? Can they transfer such property?
Yes, they may continue to hold the immovable
property under holding license obtained from the
Reserve Bank. However, they can transfer the
property only with the prior approval of the Reserve
Bank.
33. Is a resident in India governed by the
provisions of the Foreign Exchange Management
(Acquisition and transfer of immovable property in
India) Regulations, 2000?
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, as amended from time to
time, i.e. she/he would require prior approval of
the Reserve Bank for acquisition and transfer of
immovable property in India even though she/he is
resident in India. Such requests are considered by
the Reserve Bank in consultation with the Government
in India. |
