In recent years, non-resident Indians (NRIs) have played a very important role in transforming the Indian real estate market. Opening-up of the Indian economy provided them with new opportunities and they have shown a great deal of confidence in the changed set up. Since 1994, NRIs have invested a sizeable amount, of which a big chunk has found its way into the property market. Participation by NRIs has brought about a lot of maturity in the market which in the past had solely banked on the actual users.

The Indian realty business is still very much un-organised and that makes things rather difficult for those who are not much familiar with the intricacies involved. In the wake of frequently changing laws, NRIs often fail to take advantage of the emerging opportunities that the market offers of late.

NRIs need to keep themselves abreast with various details as regards the Foreign Exchange Regulation Act, 1973 (FERA), Stamp Duty Act, Registration Act, and direct taxes, etc.

A) RBI permission:

The Foreign Exchange Regulation Act (FERA), 1973 puts no restrictions on NRIs holding Indian passports to acquire any immovable property in India, whether from local funds or from foreign funds, provided they neither deal in any agricultural activity nor in a real estate business with a view to earn profit or income. Foreign nationals of Indian origin, whether resident of India or abroad, have also been granted general permission to purchase any immovable property in India other than agricultural land, farm house for their bonafide residential purpose, provided the entire purchase price is paid from foreign funds and other formalities laid down in Notification No. FERA 152/93/RB dated May 26, 1993, are complied with. However, prior permission of the RBI is necessary if a foreign national of Indian origin wants to purchase an immovable property in India for bonafide residential use from local funds.

B) Repatriation of investments (Immovable Property):

i) For NRIs holding Indian passport:

After May 26, 1993, NRIs with an Indian passport have been allowed to repatriate the sale proceeds of any immovable property to the extent of original investments from foreign funds for purchase of immovable property, provided the sale has taken place after three years from the date of acquisition or from the date of the payment of final consideration whichever is later. For availing this facility, they need to submit a declaration to the RBI in form IPI-7 prescribed by RBI if they intend to avail repatriation facility in case of sale of property. If non-resident Indian nationals require repatriation they will have to comply with the formalities/conditions that deal with the acquisition/disposal of immovable properties by foreign nationals of Indian origin.

ii) Foreign nationals of Indian origin:

Foreign nationals of Indian origin have also been allowed to repatriate sale proceeds to the extent of original investments made from foreign funds for purchase of immovable property if the property is purchased on or after May 26, 1993. If they intent to repatriate the sale proceed at a later date, they will have to make a declaration to the RBI in Form IPI-7 within 90 days of such acquisition along with a certified copy of the document evidencing the transaction and a bank certificate as regards the consideration involved.

iii) Foreigners of non-Indian origin:

Foreigners of non-Indian origin can also purchase immovable property in India for residential use after obtaining permission from RBI in a prescribed Form IPI-1 provided the purchase price is paid from foreign funds. However, no repatriation facility of sale proceeds is available in such cases.

C) General permission for letting out of properties by NRIs:

The RBI has granted general permission to non-resident Indian citizens and foreign citizens of Indian origin to let out any immovable property held by them in India. Rental income accrued thereby or proceeds of any investment of such income is freely repatriable outside India.

D)As per the existing guidelines, there is no restriction on the number of residential properties that a foreign national of Indian origin can acquire in India for residential use provided the purchase price is paid in foreign exchange remitted to India through normal banking channels or funds withdrawn from the purchaser's NRE/FCNR account maintained with a bank in India. However, the facility of repatriation of the original investment is restricted to two properties only.

E) Capital gain tax on transfer of properties:

Capital gain is a gain or profit that arises on transfer of a capital following sale of capital assets. If the gain or profit arises on sale of immovable property after holding it for a period of over three years, it is called a long-term capital gain and attracts tax under the head "Capital gains tax' at a concessional rate of tax. However, if the period of holding the capital asset is less than three years, the gain is termed as a short-term capital asset and is clubbed with other income and taxed accordingly.

F) Stamp duty:

Any purchase or transfer of immovable property attracts a certain rate of stamp duty in India. The rates of stamp duty and other related guidelines vary from one state to another. The duty is at a concessional rate in the case of transfer of flats in co-operative housing societies while the rate is higher for commercial property.

G) Registration:

As per the guidelines, the document for transfer of a property is to be registered within four months from the date of its execution. The parties involved should be present at the time of registration unless the transaction is being entered through a valid power of attorney. The purchaser in a case where the consideration is more than Rs five lakhs will require will require an income tax clearance (under the Income Tax Act) of the vendor as the same is required by the registration authority.

H)If the transaction is taking place in any of the 28 specified towns/cities including Mumbai, Calcutta, Delhi, Chennai, Bangalore, etc and the specified consideration is more than the limit specified for those cities (Rs 75 Lakhs for Mumbai, Rs 50 lakhs for Delhi, Rs 25 lakhs for Calcutta, Chennai, Bangalore, Ahmedabad, Pune, Rs 20 lakhs for Chandigarh, Jaipur, etc.), there is need to seek for a no-objection certificate (Form 37-I) from the Income Tax department within 15 days of date of agreement.

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