The Indian real estate industry, despite its setbacks from the recent economic slump, is always buoyant and lucrative. When it comes to Non Resident Indians (NRIs), Indian realty is a great place to invest in for many reasons. For one, it is home and unlike NRI children who are naturalized citizens of the foreign country that they are part of, present generation NRI adults still maintain a close connection to the subcontinent and owning a property there is a good way to solidify that connection.
Secondly, the low value of the rupee vis-Ć -vis currencies such as the dollar and the pound make it possible for NRIs to purchase houses or even commercial real estate property at steal deals and with good returns. Thirdly, the house is always there for the NRI to return to after retirement, if he or she wants to choose that option. With the new government's focus on infrastructure and reforms and with world-class retail outlets, schooling and facilities emerging in India, it is possible for the NRI to explore many options. The government has also made it easier for NRIs to invest in Indian property, with the Foreign Exchange Management Act affording many good schemes.
For many important reasons, people dwelling outside India that is Non Resident Indians (NRIs), Person of Indian Origins (PIOs) and foreign nationals have been procuring immovable properties like Bungalows, flats, luxury villas and commercial properties in India. Obviously for an NRI it is always a comfort at the back of his mind that there is a real estate asset that he owns in his native country or the country of his origin. However, an NRI or PIO has to consider various aspects before procuring immovable properties in India. Such NRI\ PIO has to have complete clarity of the rules, regulations and the applicable procedures to purchase real estate in India.
A person residing outside India, planning to buy or sale an immovable property is regulated by Foreign Exchange Management Act, 1999 (FEMA) under Section 6 (3)(i), Foreign Exchange Management Regulations, 2000 (Acquisition and Transfer of Immovable Property in India) and Master Circular on Acquisition and Transfer of Immovable Property in India.
The regulations for acquiring or transferring the immovable property in India are administered by the residential status of a person under FEMA. FEMA has sorted persons in two distinct categories namely āPerson Resident in Indiaā and āPerson Resident outside Indiaā which has been further categorized as Non- Residential Indian, Foreign National of Non-Indian Origin and Foreign National of Indian Origin.
FEMA has further defined Non-Residential Indian (NRI) as a person who is a citizen of India but resides outside India. This puts forth another term, Person of Indian Origin (PIO). PIO means an individual (not a resident of Afghanistan or Bhutan or Bangladesh or China or Nepal or Pakistan or Sri Lanka.) who at some point of time held an Indian Passport; or who or either of whose parents or either of whose grandparents was a citizen of India under the Constitution of India or the Act of Citizenship, 1955 (57 of 1955).
Under Section 6 (5) of FEMA, a Person Resident outside India can purchase, transfer, invest or own any immovable property in India if it was owned, acquired by a person residing in India or inherited from a person who was a resident of India.
The rules of transfer and possession of immovable properties by an NRI are stated in the Section 3 of the Regulations. A general permission is given under the Regulation to NRI to obtain immovable properties in India. The payment of purchase price has to be made out of the capital received in India through banks, or any non-resident account as per the provisions of FEMA and regulations of the RBI. Though, NRIās cannot buy any agricultural property, plantation or farm house in India.
The rules of transfer and possession of immovable properties by a PIO are stated in the Section 4 of the Regulations. A general permission is given under the Regulation to NRI to obtain immovable properties in India. The payment of purchase price has to be made out of the capital received in India through banks, or any non-resident account as per the provisions of FEMA and regulations of the RBI. Though, NRIās cannot buy any agricultural property, plantation or farm house in India.
There are no limits levied by the RBI on the number of purchases of immovable properties by an NRI or PIO either for residential or commercial purposes. In the Master Circular it is stated that an NRI or PIO who purchases any commercial or residential property under the general permission, doesnāt need to file any documents or permissions with the Reserve Bank of India.
Foreigners of Non-Indian Origin cannot purchase, own or acquire immovable properties in India, has been stated in the Master Circular. Though, a foreigner of Non-Indian Origin can purchase immovable property in India as per the terms mentioned in the Section 2(v) of FEMA. A foreign national who is residing in India for more than 182 days in a foregoing financial year, for employment, undertaking a business or vocation or any other purpose expressing his intentions to reside in India for an uncertain period can purchase an immovable property in India as he will be a āperson resident in Indiaā as per section 2(v) of FEMA, 1999. A person should also specify his purpose of stay as well as the type of Indian Visa granted to him should mention that the stay is for uncertain period and the intentions to stay should be explicitly established with supporting documents. While a foreign national of non- Indian origin hailing from Afghanistan or Bhutan or Bangladesh or China or Nepal or Pakistan or Sri Lanka would require aforementioned approval from The Reserve Bank of India.
The term Foreign Company is demarcated as a corporate body amalgamated outside India and has a firm or other association of individuals, under the Foreign Exchange Management Regulations, 2000. As per Section 5 of the Regulations, a foreign company can obtain any immovable property in India, which has established a firm or branch in India in compliance with the Foreign Exchange Management Regulations, 2000. A declaration in form IPI also needs to be filed with the Reserve Bank of India within ninety days from the time of attaining such property. While entities incorporated in Afghanistan or Bhutan or Bangladesh or China or Nepal or Pakistan or Sri Lanka would require aforementioned approval from The Reserve Bank of India to acquire immovable properties in India.
A foreign company that has established a cooperated office in India cannot purchase immovable property in India but can lease an immovable property for not more than 5 years.
It is also prominent that each state in India has their own set of laws with respect to acquiring immovable property and as per such state laws may need acquiring a prior permission for purchasing immovable property. Hence, whether the immovable property is purchased by a PIO, NRI, Foreign National of Non-Indian Origin or a foreign company, the purchaser is required to follow the state laws as well as the norms laid down by FEMA, Regulations and Master Circular. The latest guidelines released by the Reserve Bank of India time and again, must be referred by PIO, NRI, Foreign National of Non-Indian Origin or a foreign company to avoid or minimize chances of litigations related breaches.
Many times a property is purchased in India by PIOs and NRIs by consulting with friends, relatives and colleagues who do not have real knowledge of the rules and regulations applicable which purchasing real estate assets in India. Instead one should consult real estate professionals like Property Consultants and Property Lawyers who are well versed with all such real estate laws. Proper market research should be conducted by the investor to avoid any kind of miscommunication that could lead to huge losses and legal wrangles.
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