Acquisition and transfer of Immovable property in India by NRIs and PIOs 1. Government of India has provided some special privileges to Non-resident Indians (NRIs) in areas of foreign exchange, investments including in financial sector, investment in real estate etc. These privileges are over and above the rules applicable to non-residents foreigners. 2. Persons of Indian Origin (PIO) and Overseas Citizens of India (OCI) have been given same privileges in economic field as NRIs except for investment in agricultural lands. 3. The following are the facilities granted to NRIs/PIOs: Maintenance of bank accounts in India Investment in securities/shares of, and deposits with Indian firms/companies Investments in immovable properties in India 4. Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 covers the restrictions that are imposed on non resident Indians with regards to acquisition and transfer of Immovable property in India. Further various instructions with respect to the same are consolidated in RBI Master Circular No. 4/2013-14 dated 1/7/2013. As held in the landmark judgment of Geeta Reinboth v. Mrs. J Clairs Brohier (2005) 63 SCL 411 (MP HC DB) it is a well established principle of law that restrictions on acquisition, holding, etc. of immovable property cannot be stretched so as to include prohibition to right of inheritance. Acquisition and transfer of Immovable property in India by NRIs/PIOs 5. A person resident outside India who is a citizen of India (NRI) and a person of Indian origin (PIO) are entitled to acquire any immovable property in India other than agricultural/plantation/farm house. Purchase price shall be made out of funds received from banking channels from outside India or from non-resident accounts maintained as per the provisions of FEMA Act. It may be noted that payment by way of traveller’s cheques or by foreign currency notes is not permissible as per the provisions laid down under the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 and also as per para 2A of RBI Master Circular No. 4/2013-14 dated 1/7/2013. 6. Any NRI/PIO who has purchased residential/commercial property under general permission is not required to file any documents with RBI. The same is stated in Para 2B (v) of RBI Master Circular No. 4/2013-14 dated 1/7/2013 which can be termed as additional benefits given to NRIs/PIOs. 7. NRIs/PIOs can transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India. Further if the said asset is sold, amount equivalent to foreign exchange brought in can be repatriated. NRIs/PIOs are entitled to acquire immovable property from a citizen of India by way of gift/inheritance. 8. An NRI can also avail loan facilities from authorized dealer or housing finance institutions in India to acquire any immovable property in India. Once the loan amount is repaid, the NRI may further sell the property if he so desires as the same is permissible by law. In such a case, if he had repaid the amount out of remittances abroad or from their NRE/FCNR account, sale proceeds to the extent of foreign exchange inward remittances can be remitted abroad. An NRI can acquire property even from rupee funds in India while PIO can acquire immovable property only from out of funds received in India by inward remittance. Sale of immovable property by NRIs/POIs 9. An NRI/PIO is permitted to sale his immovable property in India and repatriate the sale proceeds abroad upto US $ one million per financial year. Remission is only permitted on submission of certificate of CA in form prescribed by CBDT (in respect of TDS). 10. A person resident outside India (other than NRI/PIO) referred to in section 6(5) of FEMA or his successor, will require prior permission of RBI to repatriate sale proceeds of immovable property. Immovable Property for carrying on business by NRIs/PIOs 11. A person resident outside India who has established in India a branch or place of business in accordance with RBI regulations, can acquire any immovable property in India, which is necessary for or incidental to carrying such activity. It may be noted that all applicable laws, rules, regulations or directions for the time being in force are to be complied with regards to the said acquisition. It is also required under the provisions of law that any person acquiring property should file with the RBI a declaration in the form IPI within 90 days. Further, the form IPI is only to be filled when the immovable property is acquired in India by a person resident outside India who has established in India a branch, office or other place of business, excluding a liaison office. Transactions made by any person resident outside India who is a citizen of India or PIO are not required to be reported. 12. The property so acquired can be further transferred by way of mortgage to an authorized dealer as a security for any borrowing. If the asset is sold, sale proceeds can be repatriated only with prior permission of RBI. Conclusion 13. It is great time for NRIs/PIOs to remit funds to India for investment. And for most NRIs/PIOs, the preferred asset class continues to be real estate. NRIs have always been opportunistic in terms of investment avenues and returns. The government regularly comes up with new schemes to attract more and more investments from abroad. Real estate is one of the sectors which always grabs the attention of non-residents. 14. The Reserve Bank of India by giving permission to all non-residents who possess Indian passports as well as people of Indian origin to put their money in the real estate sector (residential as well as commercial property) has opened the floodgates for all the NRIs/PIOs to remit funds to India for investment. The number of NRIs investing in real estate is increasing fast as the value of the rupee is depreciating and real estate offers better returns. A place in the homeland usually gives a sentimental support and sense of security, which is the other reason of investment in real estate by NRIs/PIOs. 15. The RBI along with the Foreign Exchange Management Act (FEMA) has become lenient in terms of rules and regulations for non-residents who are looking for an investment in real estate. They are not only simplifying the rules but also providing the benefit of repatriation of the capital involved. The government is planning some investment growth activities through their investment promotional council, to create an environment appropriate for non-residents to put money.
Posted on: Wed, 13 Nov 2013 13:01:44 +0000
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