Many Indians
are moving out to other Countries in search of jobs and returning back only
after retirement. Nevertheless, their desire to own a house in their motherland
never dies, which, no doubt, is an asset, but is also source of revenue for the
Government.
Acquisition and
transfer of immovable property in India by Non-Resident Indians (NRIs) and
Persons of Indian Origin (PIO) are regulated by certain legislations, which
envisages certain terms and conditions, as discussed below:
The earliest
Law regulating transactions involving acquisition and transfer of the immovable
properties by NRIs and PIO is the Foreign Exchange Regulation Act 1973 (FERA)
and the same has been now replaced by Foreign Exchange Management Act, 1999
(Act 42 of 1999) (FEMA), which came into force from 1-6-2000. FEMA has
authorized the Reserve Bank of India to form guidelines with regard to
acquisition of immovable property by NRIs and PIO.
The following
are the explanation given to the frequently used terminologies and certain
mandatory pre-requisites before acquiring or transferring the property by NRIs
or PIOs, which does not require prior permission of RBI.
FEMA defines a
NRI as a person not residing in India. This category includes: Indian citizens,
who reside outside for employment, carrying on any business, vocation or any
other purpose indicating definite period of stay outside India,. Indian
citizens employed abroad with foreign Government, international agencies like
UNO, IMF, World Bank etc.,
Employees of Central
and State Governments deputed abroad on temporary assignments or posted to
their offices. This includes Indian diplomatic missions.
An Indian
citizen who goes abroad on a student visa and takes up appointment after the
completion of studies will be regarded as a person residing outside India only
after taking up a job abroad. Non-Resident Indians are not regarded as
residents in India for holidays, business, etc. Persons residing in India mean
a person residing in India for more than one hundred and eighty two days during
the previous financial year, but do not include the persons above.
A PIO means a
person residing outside India, holding an Indian passport, whose father or
grandfather was an Indian citizen by virtue of the Constitution of India or the
Citizenship Act, 1955. However, the citizens of Pakistan, Bangladesh, Sri
Lanka, Afghanistan, China, Iran, Nepal and Bhutan do not fall under this
category.
NRIs can
acquire or transfer any immovable property in India except an agricultural
land, plantation property and farmhouse. However, they can transfer the same to
an Indian Citizen residing in India.
Acquisition and Transfer of
immovable property by PIO:
PIO may
purchase any immovable property except agricultural land, farmhouse and
plantation property provided the funds are met out of the funds received in
India by inward remittances from outside India or from the funds held in
non-resident account, complying with provisions of Act and guidelines of RBI.
PIO may accept any immovable property by way of gift from a person resident in
India or from NIR or a PIO, except agricultural land, farmhouse and plantation
property.
Prior
permission of the RBI is required to repatriate the sale proceeds of immovable
property outside India, by a NRI, or his successor. The authorized dealer is
permitted to allow repatriation of the sale proceeds of immovable property in
India, outside India except agricultural, plantation property or farmhouse to a
NRI or to a PIO on following conditions:
The acquisition
of the immovable property by the Seller is in compliance with the Law and
regulations in force. The property is sold after three years from the date of acquisition
or from the date of payment of final installment of sale price, whichever is
later.
The amount to
be repatriated does not exceed the amount paid for acquisition in foreign
exchange received through normal banking channels or funds held in foreign
currency Non-Resident account or equivalent to foreign currency on the date of
payment if acquired through Non-Resident external account.
There is a
complete prohibition against acquisition or transfer of immovable property in
India by the citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China,
Nepal and Bhutan without the prior permission of the RBI. However, they may
acquire or transfer immovable property on lease, which should not be beyond
five years.
NRI or a PIO is
eligible for a housing loan to acquire residential accommodation in India
subject to the following conditions:
Loan to be
availed from an authorized dealer or a Housing Finance Institution approved by
the National Housing Bank.
Amount of loan,
margin to be met and repayment period will be as applicable to a person
residing in India.
The loan
proceeds are not allowed to be credited to Non-Residential External
(NRE)/Foreign Currency Non-Resident (FCNR)/Non-Resident non-repatriable account
of the borrower.
Loan should be
fully secured. The acquired property will; have to be given as security by
equitable mortgage. If needed, other assets of the borrower will have to be
given by way of lien.
The repayment
of loan, interest and other charges shall be by the borrower out of remittances
outside India through normal banking channels.
This may be from the funds of
the borrower in his Non-Resident External (NRE)/Foreign Currency Non-Resident
(FCNR) Non-Resident Non-repatriable (NRNR)/Non-Resident-Ordinary
(NRO)/Non-Residential Special Rupee (NRSR) account in India. The rental income
of the property acquired may also be used for repayment.
Foreign
Embassy/Diplomat/Consulate General have been allowed to purchase/Sell the
immovable property in India other than the agricultural land/Plantation
property/Farm house provided (i) Clearance from Government of India, Ministry
of External Affairs is obtained for such purchase/sale, and (ii) the
consideration for acquisition of immovable property in India is paid out of
funds remitted from abroad through banking channel.
In compliance
with the mandatory conditions envisaged in the act discussed above, it is also
important and advisable to invest in the property free from any legal hassles,
which could validly and legally convey the ownership over the immovable
property.
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