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NRI Guide



Who can purchase immovable property in India?

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

  1. Non-Resident Indian (NRI) — that is a citizen of India resident outside India.
  2. 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 his/her 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.


How many residential/commercial properties can NRIs/PIOs purchase under the general permission?

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


Can an 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, 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. On winding up of the business, the sale proceeds of such property can be repatriated only with

the prior approval of Reserve Bank. However, if the foreign company has established a liaison office, it cannot acquire immovable property. In such cases, liaison offices can take property by way of lease not exceeding five years.

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Can immovable property be acquired by way of gift?

Yes, NRIs and PIOs can freely acquire immovable property by way of a gift either from:

  1. a person resident in India or
  2. an NRI or
  3. 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 a gift.


Can a Non-Resident Indian inherit immovable property in India?

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

  1. an NRI
  2. a PIO and
  3. 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 the Reserve Bank of India.


From whom can NRIs 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 regulations applicable at that time.

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TRANSFER OF IMMOVABLE PROPERTY IN INDIA

A. Transfer by sale

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

  1. NRI can sell property in India to:
    1. a person resident in India or
    2. an NRI or
    3. a PIO.
  2. PIO can sell property in India to
    1. a person resident in India.
    2. an NRI or
    3. a PIO. — with the prior approval of the Reserve Bank of India
  3. 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 the Reserve Bank of India to:
    1. a person resident in India.
    2. an NRI or
    3. a PIO.


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

  1. NRI/PIO may sell agricultural land/ plantation property/farm house to a person resident in India who is a citizen of India.
  2. Foreign national of non-Indian origin resident outside India would need prior approval of the Reserve Bank of India to sell agricultural land/plantation property/farm house
  3. Transfer by gift


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

Yes.

  1. NRI/PIO may gift residential/commercial property to
    1. a person resident in India or
    2. an NRI or
    3. a PIO.
  2. a foreign national of non-Indian origin needs prior approval of the Reserve Bank of India.


Can an NRI/PIO/foreign national holding agricultural land/plantation property/farm house in India gift the same?

  1. NRI/PIO can gift but only to a person resident in India who is a citizen of India.
  2. foreign national of non-Indian origin needs prior approval of the Reserve Bank of India.


Can residential/commercial property be mortgaged?

  1. NRI/PIO can mortgage to:
    1. an authorised dealer/housing finance institution in India without the approval of the Reserve Bank of India.
    2. a party abroad with prior approval of the Reserve Bank of India.
  2. a foreign national of non-Indian origin can mortgage only with prior approval of the Reserve Bank of India
  3. 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 property with an authorized dealer in India.

 

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MODE OF PAYMENT FOR PURCHASE

How can an NRI/PIO makae payment for purchase of residential/commercial property in India?

Payment can be made out of

  1. funds remitted to India through normal banking channels
  2. funds remitted to India through normal banking channels

No payment can be made either by traveller’s cheque or by foreign currency notes. No payment can be made outside India.


What about refunds, if any?

Refunds, 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.

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?

Yes. However, banks cannot grant fresh loans or renew existing loans in excess of Rs 20 lakh against NRE and FCNR (B) deposits either to the depositors or to third parties.

Such loans can be repaid

  1. by way of inward remittance through normal banking channel or
  2. by debit to NRE/FCNR (B)/NRO accounts
  3. out of rental income from such property.
  4. by the borrower’s close relatives.

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.

In case the property is acquired out of rupee resources and/or the loan is repaid by close relatives in India, 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 $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.

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?

Yes, NRI/PIO can avail of housing loan in rupees from an Authorised Dealer or housing What about refunds, if any?

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Refunds, 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.

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?

Yes. However, banks cannot grant fresh loans or renew existing loans in excess of Rs 20 lakh against NRE and FCNR (B) deposits either to the depositors or to third parties.

Such loans can be repaid

  1. by way of inward remittance through normal banking channel or
  2. by debit to NRE/FCNR (B)/NRO accounts
  3. out of rental income from such property.
  4. by the borrower’s close relatives.
  5. 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.

    In case the property is acquired out of rupee resources and/or the loan is repaid by close relatives in India, 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 $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.

    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?

    Yes, NRI/PIO can avail of housing loan in rupees from an Authorised Dealer or housing finance institution subject to certain terms and conditions.

    Such a loan can be repaid

    1. by way of inward remittance through normal banking channel or
    2. by debit to his NRE/FCNR (B)/NRO account or
    3. out of rental income from such property.
    4. 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.

    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.

    In case the property is acquired out of rupee resources and/or the loan is repaid by close relatives in India, 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 $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.

    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?

    Yes, NRI/PIO can avail of housing loan in rupees from an Authorised Dealer or housing finance institution subject to certain terms and conditions.

    Such a loan can be repaid

    1. by way of inward remittance through normal banking channel or
    2. (b) by debit to his NRE/FCNR (B)/NRO account or
    3. (c) out of rental income from such property.
    4. (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.

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

    Yes, subject to certain terms and conditions.

    IV. REPATRIATION OF SALE PROCEEDS OF RESIDENTIAL/ COMMERCIAL PROPERTY PURCHASED BY NRI/PIO.

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

    NRI/PIO may repatriate the sale proceeds of immovable property

    1. (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
      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 $1 million, per financial year, as discussed below.

  6. If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to $1 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.


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

From the NRO account, NRI/PIO may repatriate up to $1 million per financial year (April-March), which would also include the sale proceeds of immovable property.

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?

Yes, provided the loan has been subsequently repaid by remitting funds from abroad or by debit to NRE/FCNR(B) accounts.

If the property was purchased from foreign inward remittance or from NRE/FCNR (B) account, can the sale proceeds of property be repatriated immediately?

Yes.


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

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


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

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 $1 million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.

If the immovable property was received as inheritance by the NRI/PIO can he/she repatriate the sale proceeds?

Yes, general permission is available to 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 $1 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 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 the Reserve Bank of India (RBI). The foreign national has to approach the RBI 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/she has to seek specific approval of the RBI.

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V. PROVISIONS FOR FOREIGN EMBASSIES/DIPLOMATS/CONSULTATE GENERALS

Can foreign embassies/diplomats/ consulate generals purchase/sell immovable property in India?

Yes, foreign embassies/ diplomats/consulate generals can purchase and sell any immovable property other 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 channels.


VI. OTHER ISSUES

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 RBI. 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.


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, he can continue to hold the residential/commercial property/ agricultural land/plantation property/farm house in India without the approval of the RBI.


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

The sale proceeds may be credited to NRO account.


Can the sale proceeds of the immovable property bought by a person when he was a resident be remitted abroad?

Yes, provided the amount to be remitted does not exceed $1 million per financial year, for all bonafide purposes to the satisfaction of Authorised Dealers and subject to tax compliance.


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 RBI continue to hold the same? Can they transfer such property?


Yes, they may continue to hold the immovable property. However, they can transfer the property only with the prior approval of the RBI.

Is a resident in India governed by the provisions of 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 the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000. He would require prior approval of the RBI for acquisition and transfer of immovable property in India even though he is resident in India. Such requests are considered by the RBI in consultation with the Government in India.

Indian regulators are known to modify laws and regulations with nagging frequency. The best of investments decisions suffer due to sudden swings in regulations. The provisions related to foreign investment in real estate in India have been relatively stable and no pejorative changes have been effected therein in the recent past. That has perhaps facilitated the aggressive alteration of India’s skyline, due to large and outstanding building projects funded interalia, by foreign funds. It has not yet fully addressed the backlog of deficit in demand for space. Such long term deficit will always attract investment therein and returns will follow. So will NRIs.

 

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Q1. Am I an NRI?

Under the Foreign Exchange Regulation Act of 1973, Non-Resident Indians are:

Indian citizens who stay abroad for employment or carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad; OR Government servants who are posted abroad on duty with the Indian missions and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources; OR

Government servants deputed abroad on assignments with foreign Governments or regional/international agencies like the World Bank, International Monetary Fund (IMF), World Health Organisation (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP) OR Officials of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

 

Q2. Who is a foreign citizen of Indian Origin?

A foreign citizen is deemed to be of Indian Origin if : i) he held an Indian Passport at any time or ii) he or his father or paternal grand father was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955. However this does not apply to citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka or Nepal

 

Q3. What is the difference between carpet area, built-up and super built-up area?

The area of an apartment or building, not inclusive of the area of the walls is known as carpet area. This is the area that is actually used and in which a carpet can be laid. When the area of the walls including the balcony is calculated along with the carpet area, it is known as built-up area. The built-up area along with the area under common spaces like lobby, lifts, stairs, garden and swimming pool is called super built-up area.

 

Q4. In what manner the purchase consideration for the immovable property should be paid 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 any non resident accounts maintained with banks in India.

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Q5. Is there any restriction on the number of residential properties that may be purchased by an NRI?

There are no restrictions on the number of residential properties that may be bought by an NRI. However, repatriation is allowed only in respect of two such properties.

 

Q6. What are the guidelines for acquisition of agricultural land / plantation property / farmhouse by NRIs and foreign citizens of Indian origin?

All requests for acquisition of agricultural land / plantation property / farm house by any person resident outside India may be made to The Chief General Manager, Reserve Bank of India, Central Office, Exchange Control Department, Foreign Investment Division (III), Mumbai 400 001.

 

Q7. Can such propery be sold without the permission of Reserve Bank?

Yes. Reserve Bank has granted general permission for sale of such property. However, where another foreign citizen of Indian origin purchases the property, funds towards the purchase consideration should either be remitted to India or paid out of balances in non-resident accounts maintained with banks in India.

 

Q8. Can sale proceeds of such property if and when sold be remitted out of India?

In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by a NRI or PIO, the authorized dealer may allow repatriation of the sale proceeds outside India, provided all the following conditions are satisfied: -

The immovable property was acquired by the seller in accordance with the provisions of the Exchange Control Rules/Regulations/Law in force at the time of acquisition, or the provisions of the Regulations framed under the Foreign Exchange Management Act, 1999;

NRIs/PIOs can effect remittance of sale proceeds of immovable property in India irrespective of the period for which the property was held. The sale proceeds allowed to be repatriated should, however, not exceed the foreign exchange brought in to acquire the said property.

In case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties, if the property was purchased from funds held in NRE Account.

The amount sought to be repatriated abroad should not exceed the amount paid for acquisition of the immovable property in the foreign exchange received through normal banking channels or out of funds held in FCNR or NRE Account. In case of investment out of NRE Account the amount to be calculated as foreign currency is equivalent value as on the date of payment for acquisition of the said property.

 

Q9. Does RBI have any guidelines for loans to NRI's/PIO's?

Yes. There are guidelines issued by the by the Reserve Bank of India for grant of Housing Loans to NRIs. The guidelines are:

  1. The loan amount shall not exceed 85% of the cost of the dwelling unit.
  2. Own contribution, which is the cost of dwelling unit financed less the loan amount, can be met from direct remittances from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.
  3. Repayment of the loan, comprising of the principal and interest including all the charges are to be remitted from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India

Q10. Can an NRI take loan against the security of immovable property in India? Are there any restrictions on the use of loan amount?

An NRI can borrow against the security of immovable property from Authorised Dealer subject to following conditions:

  1. the loan should be used for meeting the personal requirements or for borrower's own business purposes; and
  2. loan should not be used for prohibited activities, namely;
    1. business of chit fund, or
    2. (b) Nidhi Company, or
    3. agriculture or plantation activities or in real estate business, or construction of farm houses, or
    4. trading in Transferable Development Rights (TDRs),
  3. the loan amount cannot be remitted outside India,
  4. repayment of loan shall be made from out of remittances from abroad or by debit to NRE/FCNR/NRO account or out of the sale proceeds of shares or securities or immovable property against which such loan was granted.

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