Foreign / NRI Investment in Property in India

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FOREIGN INVESTMENT IN PROPERTY IN INDIA

Here we cover investment in property in India by :

A. Non Resident Indians

B. Foreign Citizen of Indian Origin

C. Non Residents & Foreign Companies

A. Non Resident Indians -

An Indian Citizen who stays abroad for employment/ carrying on business or occupation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Persons posted in UN organizations and officials deputed abroad by Central/State Governments and public Sector undertakings on temporary assignments are also treated as non-residents. Non-resident foreign citizens of Indian Origin are treated on par with non-resident Indian citizens (NRIs) for the purpose of certain facilities.

The Reserve Bank of India has allowed NRIs to use their foreign currency assets which have been earned and accumulated by them lawfully while they were resident outside India. The RBI has granted general exemption to them from the requirement of surrendering foreign exchange and income there on, in any currency (other than the currency of Nepal or Bhutan): -

acquired by them lawfully i.e. without contravention of FERA, 1973, while they were resident outside India, and/or through employment, business or vocation outside India, taken up or commenced while they were residing outside India provided that they were resident outside India for a continuous period of

not less than one year.

LOANS -

Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC,LIC Housing Finance Ltd.; etc. And authorised dealers to grant housing loans to non-resident Indian nationals for acquisition of a house/ flat for self-occupation subject to certain conditions. The purpose of thee loan, margin money and th quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should bee made within a period not exceeding 15 years out of inward remittances or out of funds held in the investors "NRE/FCNR/NRO accounts.

Reserve Bank Permits Indian firms/companies to grant housing loans to their employees deputed abroad and holding Indian Passports subject to certain conditions.

B. FOREIGN CITIZENS OF INDIAN ORIGINS-

Foreign citizen is deemed to be of Indian origin if: -

He held an Indian passport at any time, or

He or his father or paternal grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 provided that citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka and Nepal shall be deemed to be not of Indian origin.

The Reserve Bank has granted general permission to foreign citizens of Indian origin, (whether resident in India or not), to acquire and dispose of immovable properties (other than agricultural land/farm house/plantation property) situate in India subject to the fulfillment of the following conditions:

A. Acquisition/Disposal of Residential Properties in India other than by way of Gift.

Property is acquired by way of purchase or inheritance for the person's bona fide residential use and transferred by way of sale.

Consideration for the property purchased is met out of foreign exchange remitted from abroad through normal banking channels or funds withdrawn from the purchaser's NRE/FCNR account maintained with a bank in India.

Property purchased is not let out except where it is not immediately enquired for the purchaser's own residential use.

A declaration is submitted to Reserve Bank (Central Office) about such acquisition in form IPI 7 within a period of 90 days from such acquisition/final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

Income accruing by way of rent or sale proceeds of the property or income arising out of investment of such proceeds is credited to the person's NRO account (if the property is held by a non-resident foreign citizen of Indian origin) or to the Resident Rupee Account i.e.Q.A.22 Account (if the property is held by a foreign citizen of Indian origin resident in India) with a bank in India.

In respect of residential properties purchased on or after 26th May 1993, Reserve Bank would consider applications for the repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of the property (only up to two such properties) provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final installment of consideration amount, whichever is later. Applications for the purpose should be made to Reserve Bank (Central Office) in form IPI 8 within 90 days of the sale of the property.

B. Acquisition by way of purchase or inheritance or disposal by way of sale of Commercial Properties in India.

Property (not being agricultural land/farm house/plantation property) situated in India is acquired by way of purchase or inheritance and transferred or disposed of by way of sale.

A declaration is submitted to Reserve Bank (Central Office) about acquisition of the commercial property in form IPI 7 within a period of 90 days from such acquisition/final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

Reserve Bank would consider applications for repatriation of original investment in commercial property in respect of properties purchased on or after 26th May 1993 up to the consideration amount remitted in foreign exchange for the acquisition of the property provided the property is sold after a period of three years from the date of the final purchase deed or from the date of payment of final installment of consideration amount, whichever is later.

The balance amount of sale proceeds of the properties should be credited to the seller's NRO account or Resident Rupee Account (Q.A. 22 Account) in the case of resident foreign citizens maintained with a bank in India. Applications for repatriation of the amount should be made to Reserve Bank (Central Office) in form IPI 8 within 90 days of the sale of the property.

C. Non Residents & Foreign Companies

Persons who are not citizens of India (whether resident in India or not) and companies (other than banking companies) which are not incorporated under any law in force in India are required to obtain prior permission of Reserve Bank to acquire, hold, transfer or dispose of by sale, mortgage, lease, gift, settlement or otherwise any immovable property situated in India. The work relating to the permission for acquisition, etc of immovable property is centralized in the Central Office of Reserve Bank (Foreign Investment Division) at Mumbai.

However, the above restrictions do not apply to immovable property taken or given on lease for a period not exceeding five years.

Prior permission of Reserve Bank is necessary for acquisition, disposal etc. of flats in co-operative housing societies.

Nepalese or Bhutanese nationals, whether resident in India or not, as well as Nepalese companies in Nepal or Bhutanese companies in Bhutan should obtain prior permission of Reserve Bank for acquisition, holding, etc. of immovable property in India even though the transactions may be settled in Indian rupees.

In case of partnership firms, if any of the partners is a foreign citizen, the firm should obtain permission of Reserve Bank for acquisition/disposal of the immovable property.

If any member on the governing body of an association/organization or any trustee of a trust is a foreign citizen, such a body/trustee should obtain Reserve Bank's permission.

Foreign

Acquisition, Sale etc. of Immovable Property by Foreign Banks

The acquisition, sale, disposal, etc. of immovable properties in India by foreign banks operating in India is governed by the relevant provisions of Banking Regulation Act, 1949 and the policy of Reserve Bank in this regard in force from time to time. Foreign banks should ensure while undertaking such transactions in immovable property that they are in accordance with the provisions of the Act and directions issued, if any, by the Department of Banking Operations and Development of Reserve Bank.

Applications for fresh acquisition or holding of immovable property in India (other than those covered under the general permissions granted by Reserve Bank) should be made to Reserve Bank in form IPI 1 and for sale/transfer of property (other than tea, coffee, rubber, etc. plantations or those covered by general permissions granted by Reserve Bank) in form IPI 2 Applications for sale/transfer of tea, coffee, rubber etc. plantations should, however, be made in form IPI 3 together with the particulars of productivity, income, etc. in form IPI 4.

The Reserve Bank has granted general permission to companies, (other than banking companies), which are not incorporated under any law in force in India, to acquire or hold any immovable property which is necessary for or incidental to any activity permitted by Reserve Bank under Section 28 or Section 29 of FERA 1973. Companies which acquire or hold any immovable property in India in terms of the general permission are required to submit to Reserve Bank a declaration in form IPI 5 not later than 90 days from the date of acquisition of the immovable property.

The above general permission does not apply to foreign companies which have been permitted under Section 29 of the Act to open liaison offices or to post representatives in India.

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