NRIs guide to buying the property
When buying a property the first thing of concern is finance which is not so easy to attain. But over the years the Indian law has made the job much easy. 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.
The deals made fall under the Foreign Exchange Management Act (FEMA) and are under the surveillance of Reserve Bank of India.
There must be thousands of questions arising in your mind when you are buying a property. Get an insight of all your questions and the answers required.
How can NRIs invest in real estate?
According to the regulations of FEMA and RBI, an NRI is permitted to make specific investment in real estate. An NRI is allowed to do the following investments in property.
To obtain a property in India do the NRIs require the consent of RBI?
No, there is no special permission to be obtained from the Reserve Bank of India (RBI) to acquire residential/commercial property in India.
How to finance the investment to be made?
You have numerous banks in the country to help. These financial institutions easily grant loans under the norms set by RBI.
The imbursement of the down payment amount should be done via normal banking channels such as NRO/NRE account in India.
Unlike the initial times, the restrictions relating to investment by NRIs in Indian properties have been lessened. An NRI can easily buy a property with the funds received from regular banking. Also an NRI can hold a Foreign Currency Non-Resident FCNR account, Non-Residential External (NRE) account or a Non Resident Ordinary (NRO) account to make a property purchase.
What are the rules to be followed by the NRIs in order to own a property in India?
India real estate growth prospect lure investors from every parts of the world and NRIs are looking to capitalize by buying property in India. However, there are various rules and norms which should be followed by the NRIs in order to own a property in India. Here are a few steps which should be followed by an NRI for property buying:
If you are an NRI and are looking for investing in a property in India, you should obtain a Person of Indian Origin (PIO) certificate as an eligibility proof. In case you do not have your PIO certificate, you can always produce your mothers/fathers birth certificate for the eligibility. However, these documents should be submitted to the Indian embassy of the particular country.
Unlike the initial times, the restrictions relating to investment by NRIs in Indian properties have been lessened. An NRI can easily buy a property with the funds received from regular banking. Also an NRI can hold a Foreign Currency Non-Resident FCNR account, Non-Residential External (NRE) account or a Non Resident Ordinary (NRO) account to make a property purchase. An NRE account is required for the pay outs and an NRO account is required for the depositing and the transferring of money.
Once the relevant income tax and capital gains at the time of sale proceedings are deducted from the account, one can repatriate the funds from the NRE account to the foreign account.
In case if an NRI wishes to rent out a property, he/she can rent the immovable property. However, the rental income or the profit which is made as returns from the property will be eligible for repatriation for payment of taxes and payment of a certificate which is produced by a chartered accountant.
If an NRI owns a property in India and wants to sell it away, he/she can sell it to another NRI or any person residing in India who is free from any legal issues. However, the purchase or sale of a farm house or other agricultural land is not permitted, but gifting of an agricultural land or a farm house or plantation land is permitted to a resident of India. The same follows with an NRI or a PIO.
Can NRIs obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance?
Reserve Bank of India (RBI) has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., and authorised dealers to grant housing loans to Non-Resident Indians for acquisition of a house/flat. The purpose of the loan, margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittances or out of funds held in the investors NRE/FCNR/NRO accounts.
Can authorised dealers grant housing loans to non-residents of Indian nationality where he is a principal borrower with his resident close relative as a co-obligant/guarantor or where the land is owned jointly by such NRI borrower and his resident close relative?
Yes. However, in such cases the payment of margin money and repayment of the loan instalments should be made by the NRI.
What are the formalities required to be followed by NRIs for purchasing residential immovable property in India?
They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable property or final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.
How can a purchase procedure be conducted?
A sale agreement must be drawn on a Rs. 50 stamp paper, which will mention the final amount, advance payment, time limit to pay the due amount and details of installments.
Once the sale deed is completed, you need to get it registered at the sub-registrar or Sub-District Magistrate. The overseas buyers foreign address has to be mentioned in the sale agreement. He can appoint a representative in India (with a power of attorney) to act on his behalf. The power of attorney should be notarised with the Indian consulate in the buyers country of residence.
The property can be registered in the name of the NRI and the holder of the power of attorney can sign on his behalf by producing a copy of the document to the appropriate authorities.
Can immovable property held in India, be transferred by way of gift to relatives/registered charitable trusts/organisations in India?
Yes. General permission has been granted by Reserve Bank to non-resident persons (foreign citizens) of Indian origin to transfer by way of gift immovable property held by them in India to relatives and charitable trusts/organizations subject to the condition that the provisions of any other law, including Foreign Contribution (Regulation) Act, 1976, as applicable, are duly complied with.
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 and a declaration is submitted to the Central Office of Reserve Bank in form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.
Can residential/commercial be given on rent if not required for immediate use?
Yes. Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income are eligible for repatriation.