Non-resident Indians can freely purchase and sell residential and commercial properties in India. Foreigners will have to obtain RBIs permission for the same. However, a foreign citizen of Indian origin does not have to obtain RBI's permission for purchasing and selling residential and commercial properties (other than agricultural/plantation land and farm house) for bonafide purposes provided the purchase is met through foreign exchange. In such cases, a declaration has to be submitted to RBI within 90 days of the purchase.

Sale proceeds of not more than two residential properties and any number of commercial properties purchased by NRIs with foreign exchange funds and sold after at least 3 years can be repatriated after obtaining RBI's specific permission for the same upto the purchase amount made with foreign exchange funds. Permission from RBI will have to be sought within 90 days of the sale of the property.

Giving and receiving gift of properties are freely permitted for Indian citizens, but foreign citizens require RBI's permission for the same. However, a foreign citizen of Indian origin does not have to obtain RBI's permission for acquiring or disposing off gifts (upto two residential properties for receiving as gift) from or to a relative. (Charitable trust also for giving gifts)

The NRIs can freely let out their residential or commercial properties in India. The rental income should however be routed through the NRO account. The rental income is freely repatriable from 1996-97 and is subjected to production of undertaking/certificate regarding payment of tax from the Income Tax authorities. Non-resident Indians can avail housing loans from banks and housing finance institutions for an acquisition of one house/flat which is subjected to prescribed conditions. At least 25% of the cost of acquisition should be met with foreign exchange funds.

A foreign citizen is deemed to be of Indian origin if he or his father or paternal grandfather was at any time a citizen of India, provided he is not a citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka and Nepal.

NON-RESIDENTS HOLDING INDIAN PASSPORTS :

As the provisions of Section 31 of FERA, 1973 are not applicable to Indian Citizens whether resident or non-resident, the Indian citizens do not require permission from the Reserve Bank of India for acquisition/disposal of house, flat in any manner whatsoever.

If an NRI invests in residential/commercial property out of funds remitted from abroad through normal banking channels or from his NRE/FCNR accounts through banks in India, he will be entitled to the benefits of repatriation of original investment through foreign exchange if the sale is made after three years from the date of purchase. For this purpose he has to submit a declaration to the Reserve Bank in form IPI-7 within 90 days of purchase of the property so as to avail the repatriation facility. NRIs are barred from investing in agricultural lands, farm houses and plantations and for carrying out business of the real estate as distinguished from real estate developments.

Inheritance :

RBI has granted general permission to NRIs (irrespective of their citizenship) to acquire immovable property by inheritance. As per general permission the repatriation of sale proceeds of such inherited properties is not permitted. We are of the opinion that if the deceased had acquired property on or after 26/5/1993 by remitting foreign funds through normal banking channels or by investing from his NRE/FCNR account and also filed declaration in form IPI-7 the successor should be entitled for repatriation of original investment in foreign exchange.

NON-RESIDENTS HOLDING FOREIGN PASSPORTS :

Section 31 of FERA, 1973 places restrictions on the acquisition, holding etc. of immovable property in India. These are as follows :-

"(i) A Person who is not a citizen of India and companies (other than a banking company) which is not incorporated under any law in force in India shall, except with the previous general or special permission of the Reserve Bank, acquire, hold, transfer or dispose off by sale, mortgage, lease, gift, settlement or otherwise any immovable property situated in India, provided that above restriction does not apply to the acquisition or transfer of any such immovable property by way of lease for a period not exceeding five years".

The provisions of section 31 are also applicable to Nepalese citizens. In the case of Nepalese citizens the Reserve Bank gives permission only after obtaining the specific approval of Ministry of Finance, Government of India. All works relating to grant of permission for acquiring immovable property as mentioned above are centralized in the Central Office of Reserve Bank of India, Foreign Investments Division -III, 11th Floor, Central Office building, Fort, Mumbai - 400 001.

Different types of acquisition/disposal of immovable properties are discussed here under :

1. Properties held at the commencement of FERA, 1973 :

All the foreign nationals holding properties in India prior to 1st January 1974 are required to make declaration in form IPI 6 to the Reserve Bank and the Reserve Bank issues 'Holding Licenses' to them.

2. General permission to Foreign companies :

The Reserve Bank has given general permission to the foreign companies to acquire or hold such immovable property which is necessary for or incidental to any activity permitted by the Reserve Bank of India under Section 28 or 29 of FERA, 1973. The foreign companies engaged in manufacturing or trading activity will be permitted to open branches in India for the following purposes.

• To represent the parent company/other foreign companies in various matters in India e.g. acting as buying/selling agents in India.

• To conduct research work in which the parent company is engaged provided the results of the research are made available to Indian companies.

• To undertake export and import trading activity.

• To promote technical and/or financial collaboration between Indian Companies and overseas companies.

However after acquisition, the companies are required to submit to the Reserve Bank of India a declaration in form IPI-5 within 90 days from the date of acquisition of the immovable property. This permission is not given to those foreign companies which have been permitted under Section 29 of FERA 1973 to open liaison offices or to post representatives in India. In the case of those companies which are not covered by the general permission, the applications should be submitted in forms as under :

• Form IPI-1 Fresh acquisition

• Form IPI-2 Sale/transfer of property (other than tea, coffee, rubber etc. plantations)

• Form IPI-3 sale/transfer of tea, coffee, rubber, etc. plantations

• Form IPI-4 Details of income etc. should be enclosed with IPI-3

3. General permission for acquisition/disposal of residential/commercial properties by non-resident Indians holding Foreign Passport (i.e. Foreign Citizens of Indian Origin) :

The Reserve Bank of India has granted general permission for the following modes of acquisition/disposal :

• Acquisition/Disposal of Residential Property in India other than by way of Gift.

• Acquisition/Disposal of Residential property by way of Gift.

• Acquisition by purchasing, inheriting or Disposing through sale of Commercial property in India.

• Letting out Residential Property in India by Non-Resident Indians and Persons of Indian origin.

(i) Acquisition/Disposing off Residential Property in India other than by way of Gift :

The Reserve Bank has granted General permission to foreign citizens of Indian origin to acquire and dispose of any number of immovable properties (Other than Agricultural Land/Farm Houses/Plantation Property) situated in India subject to the following conditions:

• The property is required for bonafide residential use.

• The consideration is paid out of inward remittances or by debit to NRE/FCNR Account

• The property purchased would not be let out unless it is proved that the same is not required for the purchaser's residential purpose in the immediate future.

• The acquisition should be reported in form IPI 7 to the Reserve Bank within 90 days from the date of acquisition;

• The income arising out of sale proceeds of the property (purchased before 26/5/1993) will not be allowed to be repatriated. It will remain in India in the non-resident's NRO account.

• In the case of properties acquired on or after 26th May 1993 the sale proceeds limited to the original investment in respect of not more than two properties will be allowed to be repatriated provided the property is sold after a period of 3 years from the date of final purchase or from the date of payment of the final installment of the consideration. The surplus (i.e. sale proceeds minus original investment) will be credited to NRO account. The necessary application is required to be made to RBI in form IPI-8.

(ii) Acquisition/Disposal of Residential property by way of Gift :

Foreign Citizens of Indian origin are allowed to acquire, transfer or dispose off by Accepting gift from or to a "relative" as defined in Section 6 of the Companies Act, 1956 (1 of 1956) who may be an Indian citizen or a person of Indian origin whether residing in India or not, provided the Gift tax is paid. The gift should not exceed two residential properties in the case of persons residing outside India.

(iii) Acquisition by way of purchase and sale of Commercial Property in India :

Foreign citizens of Indian origin are allowed to acquire, transfer or dispose off any number of property (not being agricultural land/farm house/Plantation) which are subjected to the following conditions :

• The property is purchased out of NRE/FCNR funds or by way of inward remittances.

• The purchase is reported in form IPI-7 to RBI within 90 days from the date of acquiring the commercial property.

• The Repatriation of original investment may be allowed by RBI provided the property is sold after a period of 3 years from the date of final purchase or from the date of payment of the final installment of the considering amount. The balance amount of sale proceeds will be credited to the party's NRO account. This facility is also available to Non-Resident Indian Nationals.

Note : The above facility is not available to the citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka and Nepal even though they may be of Indian origin.

(iv) Letting out Residential Property in India by non-resident Indians and Persons of Indian origin :

Reserve Bank 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. The rental income has to be credited to NRO account. Purchase of Immovable property in India by Foreign citizens of Non-Indian origin/Foreign companies. Application should be made to the Reserve Bank of India in form IPI-1 under Section 31(1) of FERA, 1973. Grant of Permission will be considered under the following conditions :-

• The property is being purchased for residential use only.

• The consideration for purchase of the property is met through foreign exchange remitted from abroad through some proper channel.

• The income/rent from such property or proceeds from sale of such property at any future date will be credited to the NRO account.

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