Sale, Purchase, etc., of Immovable Property in India

The Foreign Exchange Management Act, 1999 (FEMA), came in force with effect from June 1, 2000. Section 6(3)(i) of the Act empowers the Reserve Bank to frame regulations to prohibit, restrict or regulate the acquisition or transfer of immovable property in India by certain persons mainly residents outside India. The restrictions under this clause are not applicable to a lease of immovable property for a period not exceeding five years. The regulations made by the Reserve Bank are called Foreign Exchange Management (Acquisition and Transfer of Immovable property in India) Regulations, 2000, and have been notified vide Notification FEMA No.21/2000-RB of May 3,2000. Synopsis of the said Regulations is as under:

1. All persons, whether resident in India or outside India, who are citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan, require prior permission of Reserve Bank for acquiring or transferring any immovable property in India.
2. A person resident outside India, who has been permitted by Reserve Bank to establish a branch, or office, or place of business in India( excluding a Laison Office), has general permission of Reserve Bank to acquire immovable property in India , which is necessary for, or incidental to, the activity. However, in such cases a declaration ,in prescribed form (IPI), is required to be filed with the Reserve Bank, within 90 days of the acquisition of immovable property.
3. An Indian citizen resident outside India does not require any permission to acquire any immovable property in India other than agricultural/ plantation property or a farm house.
4. An Indian citizen resident outside India does not require any permission to transfer any immovable property, to a citizen of India who is resident in India.
5. An Indian citizen resident outside India does not require any permission to transfer any immovable property other than agricultural or plantation property or farm house, to a person who :- is a citizen of India resident outside India , or is a person of Indian origin resident outside India.
6. A person of Indian origin resident outside India does not require any permission to acquire any immovable property other than agricultural land/farm house/plantation property in India by purchase, from out of funds: received in India by way of inward remittance through banking channel from any place outside India, or held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank under the Act.
7. A person of Indian origin resident outside India does not require any permission to acquire any immovable property in India other than agricultural land/farm house/plantation property by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India.
8. A person of Indian origin resident outside India does not require any permission to acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India.
9. A person of Indian origin resident outside India does not require any permission to transfer any immovable property in India other than agricultural land/farm house/plantation property, by way of sale to a person resident in India.
10. A person of Indian origin resident outside India does not require any permission to transfer agricultural land/farm house/plantation property in India, by way of gift or sale to a person resident in India who is a citizen of India.
11. A person of Indian origin resident outside India does not require any permission to transfer residential or commercial property in India by way of gift to a person resident in India or to a person resident outside India who is a citizen of India or to a person of Indian Origin resident outside India.
    
12. Repatriation outside India , including credit to RFC, NRE or FCNR account, of sale proceeds of any immovable property situated in India, requires prior permission of the Reserve Bank except in circumstances stated in paragraph 13 below.
    
13. In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by a person resident outside India, who is a citizen of India, or a person of Indian origin, the authorised dealer may allow repatriation of the sale proceeds outside India, provided all the following conditions are satisfied :-
    i. the immovable property was acquired by the seller in accordance with the provisions of the Exchange Control Rules /Regulations/Law in force at the time of acquisition, or the provisions of the Regulations framed under the Foreign Exchange Management Act,1999;
    ii. the amount to be repatriated does not exceed (a) the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in foreign currency non-resident account or (b) the foreign currency equivalent, as on the date of payment, of the amount paid where such payment was made from the funds held in non-resident external account for acquisition of the property; and
    iii. in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
    14. Authorised Dealers have been permitted to allow the facility of repatriation of funds by NRIs/PIOs in their Non-Resident Ordinary Rupee (NRO) account upto USD One Million per year representing sale proceeds of immovable property held by them for a period of not less than 10 years subject to payment of applicable taxes.
    
14. All requests for acquisition of agricultural land/plantation property/ farm house by any person resident outside India or foreign nationals may be made to The Chief General Manager, Reserve Bank of India, Central Office, Exchange Control Department, Foreign Investment Division (III), Mumbai 400 001.
    
15. The NRIs/ PIOs can freely rent out their immovable property in India without seeking any permission from the Reserve Bank. The rental income being a current account transaction is freely repatriable outside India.
    

Can NRI / PIO repatriate the sale proceeds of immovable property? If so, what are the terms?

NRI / PIO may repatriate the sale proceeds of immovable property in India

If the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account The amount to be repatriated should not exceed the amount paid for the property:

1. in foreign exchange received through normal banking channel or
2. by debit to NRE account(foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account.

Repatriation of sale proceeds of residential property purchased by NRI / PIO out of foreign exchange is restricted to not more than two such properties. Capital gains, if any, may be credited to the NRO account from where the NRI/PIO may repatriate an amount up to USD one million, per financial year, as discussed below.

If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to USD one million, per financial year, out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance.

How can an NRI / PIO make payment for purchase of residential / commercial property in India ?

Payment can be made by NRI / PIO out of

1. Funds remitted to India through normal banking channel or
2. Funds held in NRE / FCNR (B)/ NRO account maintained in India
3. No payment can be made either by traveller’s cheque or by foreign currency notes.
4. No payment can be made outside India.

Can an NRI/ PIO/foreign national sell his residential / commercial property?

(a) NRI can sell property in India to-

1. a person resident in India or
2. an NRI or
3. a PIO.

(b) PIO can sell property in India to

1. a person resident in India.
2. an NRI or
3. a PIO – with the prior approval of Reserve Bank

(c) Foreign national of non-Indian origin including a citizen of Pakistan or Bangaladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of Reserve Bank to

1. a person resident in India
2. an NRI
3. a PIO

Whether a non-resident can inherit immovable property in India?

Yes, a person resident outside India i.e.

1. an NRI
2. a PIO and
3. a foreign national of non-Indian origin can inherit and hold immovable property in India from a person who was resident in India. However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan should seek specific approval of Reserve Bank.

A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from (a) a person resident in India. (b) 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 regulations applicable at that point of time.

Whether immovable property in India can be acquired by way of gift ?

1. Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from i) a person resident in India orii) an NRI oriii) a PIO.However, the property can only be commercial or residential. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.
2. A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India through gift.

Can an 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 FERA / FEMA regulations, 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 proper banking channel. A declaration in form IPI should be filed with Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorised Dealer as a security for other borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of Reserve Bank. Further, acquisition of immovable property by entities who had set up Branch Offices in India and incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank to acquire such immovable property. However, if the foreign company has established a Liaison Office, it can not acquire immovable property . In such cases, Liaison Offices, can take property by way of lease not exceeding 5 years.

Can a foreign national of non-Indian origin resident outside India purchase immovable property in India?

No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India. But, he/she may take residential accommodation on lease provided the period of lease does not exceed five years.

Acquire, Sale or Gift Agricultural Land

Whether NRI/PIO can acquire agricultural land/ plantation property / farm house in India?

No. Since general permission is not available to NRI/PIO to acquire agricultural land/ plantation property / farm house in India, such proposals will require specific approval of Reserve Bank and the proposals are considered in consultation with the Government of India.


Can an agricultural land / plantation property / farm house in India owned / held by a non-resident be sold?

NRI / PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India.

Foreign national of non-Indian origin resident outside India would need prior approval of Reserve Bank to sell agricultural land/plantation property/ farm house in India

Can an NRI / PIO / Foreign national holding an agricultural land / plantation property / farm house in India gift the same?

NRI / PIO can gift but only to a person resident in India who is a citizen of India.

Foreign national of non-Indian origin needs prior approval of Reserve Bank

Can a person who had bought immovable property when he was a resident, continue to hold such property even after becoming an NRI/PIO?

Yes, he can continue to hold the residential / commercial property / agricultural land/ plantation property / farm house in India without the approval of the Reserve Bank

Who can purchase immovable property in India?

Under the general permission available, the following categories can freely purchase immovable property in India:

1. Non-Resident Indian (NRI)- that is a citizen of India resident outside India
2. Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan),

who at any time, held Indian passport, or

who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land / plantation property / farm house in India.

Acquisition and Transfer of Immovable Property in India by a person resident outside India

Acquiring immovable property in India by persons resident outside India is regulated in terms of Section 6(3) (i) of the Foreign Exchange Management Act (FEMA), 1999 as well as by the regulations contained in Notification issued by RBI viz Notification No FEMA. 21/2000-RB dated May 3, 2000, as amended from time to time. The persons resident outside India are categorized as Non- Resident Indians (NRIs) or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian origin. A person resident in India who is not a citizen of India is also covered by the relevant Notifications.

Statutorily, under the provisions of Section 6(5) of FEMA 1999, a person resident outside India can hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was a resident in India or inherited from a person who was a resident in India.

The regulations under the Notification No FEMA 21 dated May 3, 2000 permit a NRI or a PIO to acquire immovable property in India other than agricultural land or, plantation property or farm house. Further, foreign companies who have been permitted to open an office in India are also allowed to acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. This stipulation is not available to entities which are permitted to open liaison offices in India.

The relevant regulations covering the transactions in immovable property have been notified vide RBI Notification No.FEMA 21/2000-RB dated May 3, 2000 and this basic notification has been subsequently amended by the notifications detailed below:
Notification No.FEMA 64/2002-RB dated June 29, 2002;
Notification No.FEMA 65/2002-RB dated June 29, 2002;
Notification No.FEMA 93/2003-RB dated June 9, 2003; and
Notification No. FEMA 146/2006-RB dated February 10 2006 (available with A.P.(DIR Series) Circular No. 5 dated 16.8.2006 on website)

The restrictions on acquiring immovable property in India by a person resident outside India would not apply where the immovable property is proposed to be acquired by way of a lease for a period not exceeding 5 years or where a person is deemed to be resident in India. In order to be deemed to be a person resident in India, from FEMA angle, the person would need to comply with the criterion for residency as defined in Section 2(v) of FEMA 1999. However, citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan cannot acquire or transfer immovable property in India, (other than on lease, not exceeding five years) without prior permission of the Reserve Bank.

NRIs/PIO are allowed to repatriate an amount up to USD one million, per financial year (April-March), out of the balances held in the NRO account subject to tax compliance. This amount includes sale proceeds of assets acquired by way of inheritance or settlement.

While the statutory and regulatory provisions are indicated above, we have been receiving several queries from individuals on operational procedures regarding acquisition, holding and transferring of immovable property in India and repatriating/remitting the proceeds arising from sale of such property. In order to clarify these issues, we have attempted a set of FAQs on various issues relating to acquisition and transfer of immovable property in India by a person resident outside India and a person resident in India who is not a citizen of India.

In case there are other issues to be resolved, a reference may be made to the

Chief General Manager-in-Charge
Foreign Exchange Department Foreign Investment Division
Reserve Bank of India
Central Office Mumbai- 400 001.