Acquiring or transferring immovable property by Indian residents outside India and non-residents in India is considered a capital account transaction and is subject to restrictions. The acquisition is governed by sections 6(3), 6(4), and 6(5) of FEMA and FEM (Non-debt Instruments) Rules, 2019. In some cases, RBI approval is mandatory to purchase immovable property in India. Non-compliance with this requirement may render any sale or gift of property in India by a foreigner unenforceable in law.
As per Rule 24 of FEM (Non-debt Instruments) Rules, 2019, NRIs or OCIs can acquire immovable property in India, excluding agricultural and plantation properties. The payment for the transfer must come from funds received in India through banking channels or from funds held in non-resident accounts. Traveler’s checks, foreign currency notes, or any other mode of payment not permitted under this clause is not allowed.
Rule 24(b) of FEM (Non-debt Instruments) Rules, 2019 allows NRIs or OCIs to acquire immovable property in India by way of gift from a person resident in India or an NRI or an OCI who is a relative as defined in section 2(77) of the Companies Act, 2013. Rule 24(c) of FEM (Non-debt Instruments) Rules, 2019 permits NRIs or OCIs to inherit immovable property in India from a person who acquired it in accordance with the provisions of foreign exchange law or these rules, or from a person resident in India.
Rule 24(d) of FEM (Non-debt Instruments) Rules, 2019 permits NRIs or OCIs to transfer any immovable property in India to a resident in India. Additionally, Rule 24(e) of FEM (Non-debt Instruments) Rules, 2019 allows NRIs or OCIs to transfer any immovable property (excluding agricultural land, farm houses, or plantation properties) to other NRIs or OCIs.
Property Jointly Acquired with Spouse if Spouse is NRI and OCI
Under the proviso to Rule 25 of FEM (Non-debt Instruments) Rules, 2019, a person who is not an NRI or an OCI and resides outside of India but is the spouse of an NRI or an OCI can jointly acquire one immovable property in India (excluding agricultural land, farm houses, or plantation properties) with their NRI or OCI spouse. The payment for the transfer must be made through funds received via banking channels through inward remittance or non-resident accounts that comply with RBI regulations. It is important to note that the marriage must have been registered and subsisted for at least two continuous years before acquiring the property, and there must be no other prohibition for the non-resident spouse to acquire the property. This provision allows for easier property acquisition for non-resident spouses of NRIs and OCIs in India.
Acquisition of Immovable Property By Long-Term Visa Holder
Long-term visa holders who are citizens of Afghanistan, Bangladesh or Pakistan and belong to minority communities such as Hindus, Sikhs, Buddhists, Jains, Parsis, and Christians, can purchase one residential immovable property in India for self-occupation and one for self-employment. However, the property should not be located in restricted or protected areas notified by the Central Government or cantonment areas.
To purchase the property, the person must submit a declaration specifying the source of funds and LTV residency to the Revenue Authority of the district where the property is located. The registration documents of the property should mention the nationality and LTV status of the purchaser. It should be noted that the property may be attached or confiscated in case of any anti-India activities.
Repatriation of Sale Proceeds of Immovable Property By NRI or OCI
According to Rule 29(1) of FEM (Non-debt Instruments) Rules, 2019, a person covered under section 6(5) of FEMA or their successor cannot repatriate the sale proceeds of an immovable property outside India without the Reserve Bank’s permission. However, if an NRI or an OCI sells an immovable property in India that’s not agricultural land or farm house or plantation property, the authorized dealer may allow repatriation of the sale proceeds outside India subject to certain conditions, as per Rule 29(2) of FEM (Non-debt Instruments) Rules, 2019. These conditions include that the property was acquired in accordance with foreign exchange laws or FEM rules, the payment for acquisition was made through banking channels or NRI accounts, and in case of residential property, not more than two such properties can be repatriated.
