Introduction:
Investing in real estate in India offers a promising prospect for Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs). However, the process entails understanding and adhering to regulations set forth by the Foreign Exchange Management Act, 1999 (FEMA) and the Foreign Exchange Management (Non-Debt Instrument) Rules, 2019. This guide aims to address common queries, providing a thorough understanding of key aspects involved in acquiring immovable property in India.
Acquisition by NRIs and OCIs:
NRIs and OCIs can acquire immovable property in India through various channels, including purchase, inheritance, or as a gift from residents, NRIs, or OCIs. The detailed provisions are outlined in the NDI Rules, 2019, specifying permissible transactions and involved parties.
Accepted Modes of Payment:
Payments for property in India must be made through banking channels, ensuring compliance with applicable taxes and levies. Additionally, funds from NRE/FCNR(B)/NRO accounts of NRIs/OCIs can be utilized for transactions. Notably, payments should not be made using travelers’ cheques or foreign currency notes.
Foreign Embassies/Diplomats/Consulate Generals:
Foreign diplomatic missions can purchase or sell immovable property in India, provided they obtain clearance from the Government of India, Ministry of External Affairs. The consideration for such transactions must be remitted from abroad through banking channels.
Property Acquisition by Foreign Nationals:
Individuals from Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong, or the Democratic People’s Republic of Korea (DPRK), regardless of their residency status, are prohibited from acquiring or transferring immovable property in India without the prior approval of the Reserve Bank. However, this restriction does not apply to Overseas Citizens of India (OCIs).
Foreign nationals of non-Indian origin who are residents in India (excluding the 11 countries mentioned above) have the right to acquire immovable property in India.
Foreign nationals of non-Indian origin residing outside India are permitted to acquire or transfer immovable property in India on lease for a period not exceeding five years. Additionally, they can inherit immovable property in India from a resident.
Any other acquisitions or transfers of immovable property in India by foreign nationals require the prior approval of the Reserve Bank of India (RBI).
Long Term Visa (LTV) Holder:
LTV holders, belonging to minority communities from Pakistan, Bangladesh, or Afghanistan, can purchase one residential property for self-occupation and one property for self-employment in India. Specific conditions under Rule 28 of Foreign Exchange Management (Non-Debt Instrument) Rules, 2019, must be met.
Spouse of NRI/OCI:
The spouse of an NRI/OCI, who is not an NRI/OCI, can jointly acquire one immovable property in India, excluding agricultural land, farmhouse, or plantation property. This is subject to conditions laid down in Rule 25 of Foreign Exchange Management (Non-Debt Instrument) Rules, 2019.
Repatriation of Sale Proceeds:
An individual who has acquired property under Section 6(5)iv of FEMA or their successor is not permitted to repatriate the sale proceeds of that property without obtaining approval from the Reserve Bank of India (RBI).
Repatriation of funds up to USD 1 million per financial year is allowed, in conjunction with other assets, as per the regulations outlined in the Foreign Exchange Management (Remittance of Assets) Regulations, 2016. This provision applies to Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and foreign citizens (excluding Nepal, Bhutan, and PIOs) under specific circumstances:
- Inheritance from an individual mentioned in Section 6(5) of FEMA.
- Retirement from employment in India.
- Non-resident widows or widowers inheriting assets from their deceased spouse, who was an Indian national resident in India.
NRIs and PIOs have the privilege of remitting the sale proceeds of immovable property in India, subject to the following conditions:
- The immovable property was acquired in accordance with the prevailing foreign exchange law at the time of acquisition or adhering to the provisions of the Foreign Exchange Management (Non-Debt Instrument) Rules, 2019.
- The amount for the acquisition of the property was paid in foreign exchange received through banking channels or sourced from funds held in a foreign currency non-resident account or non-resident external account.
- For residential properties, the repatriation of sale proceeds is restricted to not more than two such properties.
Understanding Transfer:
In the context of FEMA, transfer encompasses various transactions such as sale, purchase, exchange, mortgage, pledge, gift, loan, or any other form of transfer of right, title, possession, or lien, as defined by section 2(ze) of FEMA.
Conclusion:
Acquiring immovable property in India as a non-resident individual involves careful consideration of regulations and compliance with FEMA and related rules. This guide serves as a comprehensive resource, providing clarity on common queries and facilitating a smoother process for NRIs and OCIs interested in real estate investments in India. It is essential to stay updated with any amendments to regulations and seek professional advice when navigating through complex transactions.
Note:-
- Relative is as defined in section 2(77) of the Companies Act, 2013.
- NRI refers to a person resident outside India who is a citizen of India.
- Overseas Citizen of India (OCI) is a person resident outside India who is registered as an Overseas Citizen of India Cardholder under Section 7(A) of the Citizenship Act, 1955.
