The real estate sector in India is being recognised as an infrastructure service that is driving the economic growth engine of the country. The size of the Indian real estate market is expected to touch US$ 180 billion by 2020 and foreign direct investment (FDI) in the sector is expected to increase from US$ 4 billion at present to US$ 25 billion in the next 10 years, according to an industry report. Demand is expected to grow at a compound annual growth rate (CAGR) of 19 percent between 2010 and 2014, with Tier I metropolitan cities projected to account for about 40 percent of this demand. Growing infrastructure requirements from sectors such as education, healthcare and tourism are also providing opportunities in the real estate sector. Further, the growth prospects and price stability in smaller cities are attracting large real-estate developers, according to a report titled 'Real(i)ty Next: Beyond the Top 10 Cities of India', released by Crisil Research in June 2011. The report estimates that the value of the sales of new residential apartments in 10 such smaller cities was around US$ 4 billion in 2012. Non-Resident Indians and foreign citizens who are Persons of Indian Origin (PIO) are allowed to purchase immoveable property in India. Residential property prices have stabilized now, making them attractive to NRI home buyers. Industry experts feel that with attractive pricing, innovation in construction technology and variety of designs, NRIs are taking a fresh look at India as a unique market in which they can invest.
Who can purchase immovable property in India?
Under the general permission available, the following categories can purchase immovable property in India:
The general permission however, only covers the purchase of residential and commercial property and is not available for purchase of agricultural land/plantation property/farmhouses in India.
Who qualifies as a Non-Resident Indian (NRI)?
An NRI is a person residing outside India but who is either a citizen of India or a person of Indian origin. Under the Foreign Exchange Management Act (FEMA), a person is generally considered to be residing outside India if the person is in India for less than 182 days during the course of the preceding financial year or if the person stays abroad for:
provided the student has stayed overseas for more than 182 days in the preceding financial year.
Who is a person of Indian origin?
You are deemed to be a person of Indian origin if you are a foreign citizen (other than of Pakistan or Bangladesh), and if:
Can a foreign national of non-Indian origin be a second holder to immovable property purchased by NRI / PIO?
No
Can a foreign national of non-Indian origin residing outside India purchase immovable property in India?
A foreign national of non-Indian origin residing outside India cannot purchase any immovable property in India unless such property is acquired by way of inheritance from a person who was residing in India. However, they can acquire or transfer immovable property in India, by way of a lease that does not exceed five years. In such cases, there is no need to take any permission or report to the Reserve Bank.
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 they would have to obtain the approvals and fulfill the requirements, if any, that are prescribed by other authorities such as the State Government concerned, etc. The onus to prove their 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.
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 the IPI form 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 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 a lease that does not exceed five years.
How many residential / commercial properties can an NRI / PIO purchase under the general permission? There are no restrictions on the number of residential / commercial properties that can be purchased.
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 residing in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, 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. they would require prior approval of the Reserve Bank for acquisition and transfer of immovable property in India even though they are residing in India. Such requests are considered by the Reserve Bank in consultation with the Government of India.
Can an NRI/PIO acquire immovable property in India by way of agift? Can a foreign national acquire immovable property in India by way of a gift?
Yes, NRIs and PIOs can freely acquire immovable property by way of a gift either from:
However, the property can only be commercial or residential in nature. Agricultural land/plantation property/farmhouses in India cannot be acquired by way of gifts.
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.
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 either a person resident in India or 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.
Can NRIs and PIOs gift residential / commercial premises to relatives / registered charitable trusts / organizations in India?
Yes, general permission has been granted by the Reserve Bank of India to NRIs and PIOs to transfer by way of a gift, immovable property held by them in India, to relatives and charitable trusts/organizations, subject to compliance with the conditions and provisions of other applicable laws.
Can a person who had bought immovable property, when he was a resident, continue to hold such property even after becoming an NRI/PIO? In which account can the sale proceeds of such immovable property be credited?
Yes, a person who had bought the residential/commercial property/agricultural land/plantation property/farm house in India when he was a resident, can continue to hold the immovable property without the approval of the Reserve Bank even after becoming an NRI/PIO. The sale proceeds may be credited to the NRO account of the NRI /PIO.
Can an NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds?
Yes, an NRI/PIO can rent out the property without the approval of the Reserve Bank. The rent received can be credited to an 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 or provided for.
Can the sale proceeds of the immovable property referred to in the above question be remitted abroad?
Yes, from the balance in the NRO account, an NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of authorised dealer and payment of applicable taxes.
Can foreign nationals of non-Indian origin residing 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 a holding license obtained from the Reserve Bank. However, they can transfer the property only with the prior approval of the Reserve Bank.
Do any documents need to be filed with the Reserve Bank after the purchase?
An NRI/PIO, who has purchased residential/commercial property under general permission, is not required to file any documents or reports with the Reserve Bank.
How can an NRI / PIO make payment for purchase of residential / commercial property in India?
Payment can be made by an NRI/PIO by way of either:
Payment cannot be made using traveller's cheques, foreign currency notes or any other mode, except the ones specifically mentioned above.
Does the Agreement of Sale have to be registered?
In many states in India, the Agreement of Sale between the builder and purchaser is required by law to be registered. You are advised in your own interest to lodge the agreement for registration within four months of the date of the Agreement at the office of the Sub Registrar appointed by the State Government, under the Indian Registration Act, 1908.
Can an NRI/PIO avail of a loan from an authorised dealer for acquiring a flat or house in India for their own residential use against the security of funds held in their 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 by the Reserve Bank of India. Such loans can be repaid in either of the following manners:
Can an NRI / PIO, avail of a 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 their residential accommodation? How can such a loan be repaid?
Yes, an NRI/PIO can avail of an housing loan in Rupees from an authorised dealer or a housing finance institution subject to certain terms and conditions laid down by the Reserve Bank 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 or 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 either:
Can an NRI / PIO avail of a 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 residing 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.
Can NRIs and PIOs give a Power of Attorney in favour of a person of their choice in India to complete loan formalities on their behalf?
Yes. Normally it is desirable to appoint a Power of Attorney in India to represent you in dealings in India. The Power of Attorney should be executed as per drafts provided by the housing finance company. The Power of Attorney holder should be a trustworthy person.
What are the types of housing loans available?
Various housing loans are offered by financial institutions. Prominent among these are: