Investments in Immovable Properties

Q : Do non-resident Indian citizens require permission of Reserve Bank to acquire residential/commercial properly in India?

No.

Q : Do foreign citizens of Indian origin require permission of Reserve Bank to purchase immovable property in India for their residential use?

No. Foreign citizens of Indian origin are permitted to purchase immovable property in India (residential or commercial) other than agricultural/plantation property or farm house.

Q : In what manner the purchase consideration for the residential immovable property should be paid by foreign citizens of Indian origin under the general permission?

• The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India.
• When a resident leaves India for another country (other than Nepal and Bhutan) and becomes a non-resident, he will be required to designate all his resident bank accounts in India as NRO A/c or as NRSR A/c.
• You can purchase immovable property from NRO/NRSR account, but only on a non-repatriable basis.
• If you want repatriation, you will have to route the money for acquiring the immovable property either through direct remittance of foreign funds or through your NRE/FCNR account.

Q : What are the formalities required to be completed by foreign citizens of Indian origin for purchasing residential immovable property in India under the general permission.

No formalities are to be completed by foreign citizens of Indian origin for purchasing residential property in India.

Q : Can such property be sold without the permission of Reserve Bank?

Yes. Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another foreign citizen of Indian origin, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.

Q : Can sale proceeds of such property if and when sold be remitted out of India?

Yes. While there is no restriction on the number of properties including flats/apartments that NRIs and PIOs camn buy, however, at the time of transfer, the facility of repatriation shall be restricted to the cost of the properties bought keeping in view that the payment for acquisiton was received in foreign exchange by inward remittance or thro NRE/FCNR(B) account of the NRI/PIO. Further, in respect of residential property, NRIs/PIOs are allowed repatriation only in respect of a maximum of two properties.

Q : Can foreign citizens of Indian origin acquire or dispose of residential property by way of gift?

Yes. Reserve Bank has granted general permission to foreign citizens of Indian origin to acquire or dispose of properties up to two houses by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin whether resident in India or not. There is no gift tax applicable as Gift tax has been abolished in India with effect from 1998.

Q : Can foreign citizens of Indian origin acquire commercial properties in India?

Yes. Under the general permission granted by Reserve Bank properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchasers' NRE/FCNR accounts maintained with banks in India.

Q : Can the properties (residential/commercial) be given on rent if not required for immediate use?

Yes. Reserve Bank has granted general permission for letting out of any immovable property in India. The rental income or proceeds of any investment of such income has to be credited to NRO account.

Q : Can NRIs obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance?

Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC,LIC Housing Finance Ltd.,etc. to grant housing loans to non-resident Indian nationals for acquisition of houses/flats for self-occupation subject to certain conditions.

Q : Can authorised dealer grant loans to NRIs for acquisition of a flat/house for residential purposes?

Authorised dealers have been granted permission to grant loans up to non-resident Indian nationals for acquisition of house/flat for self-occupation on their return to India subject to certain conditions. Repayment of the loan should be made within a period not exceeding 15 years out of inward remittance through banking channels or out of funds held in the investors' NRE/FCNR accounts.

Q : An NRI has inherited certain immovable property in India. Can he repatriate the sale proceeds on sale of his inherited property ? Can the rent accruing from the letting out of this property be repatriated?

Repatriation of sale proceeds arising out of sale of an inherited property is not allowed as the sale proceeds would require to be credited to the NRO account. The rental income arising out of the letting out of the property can however be allowed to be repatriated by the Bank, subject to fulfillment of certain conditions.

Q : I am a foreign citizen of Indian origin. What legal steps do I need to take to purchase property in India?

RBI has granted general permission to Non-resident Indians holding foreign passport (i.e. foreign citizens of Indian origin) to acquire, hold, transfer or dispose of by way of sale or inheritance immovable properties situated in India provided

1. the property is for the purchaser's bona fide residential purpose;
2. the purchase consideration is met either by remittance of funds from abroad through normal banking channels or out of NRE/FCNR Account or out of FCNR Special Deposit Account;
3. income accruing by way of rent from the properties purchased or acquired by inheritance will have to be credited to the non-resident ordinary (NRO) account even it the purchase consideration was met our of NRE/FCNR Account.

Q : I am an NRI. I want to buy a flat in India in my relative's name. Does the relative have to pay tax on it or are there other complications? This relative has no other source of income.

General Permission has been granted to persons of Indian origin whether holding Indian passports or foreign passports to acquire, transfer or dispose of residential properties (restricted to two houses) situated in India by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin, whether resident in India or not.

For enabling you to buy the house in your relative's name you must transfer the money through normal banking channels in her account in India and he/she should buy the flat in his/her name from the money remitted by you. As the money remitted by you will be considered a gift to your relative, there will be no tax payable by her.

Q : Can Indian companies grant housing loans to their NRI staff?

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

Q : What are the options available for obtaining guarantors while applying for a HDFC/LIC loan

One will need a guarantor for a loan mainly for collateral security. The guarantor will have to demonstrate appropriate networth to cover for the loan. Usually one can have a guarantor in any city where the loan issuer has a branch. Talk to loan issuers they will work something out for NRIs and foreign banks.

Q : While purchasing real estate most developers demand a Power of Attorney in their favor, is there a way to avoid it?

One can choose not to grant the Power of Attorney (POA) to the developers. However this will mandate the mailing of all documents to your foreign residence and associated time delays. A good compromise is to grant the POA to the builder only for specific necessary items.