FEMA ASPECTS - Acquisition and Transfer of immovable property

The Foreign Exchange Management Act, 1999 (FEMA) and the Regulations notified by the Reserve Bank of India (RBI), regulates the acquisition or transfer of immovable property in India by Persons resident outside India.

This article talks about FEMA Aspects on Acquisition and transfer of immovable property in India by a Non-Resident Indian (NRI) or and Overseas Citizen of India (OCI) or a Foreign Citizen. 

  1. Acquisition/Transfer by NRI/OCI
    1. Acquisition:

      NRI/OCI can acquire immovable property (other than an agricultural land, farm house, plantation property) by way of:

      1. Purchase from Person resident in India/NRI/OCI.
      2. Gift from Person resident in India/NRI/OCI, who is a close relative.
    2.  

    3. Inheritance:

      NRI/OCI can inherit any immovable property (including agricultural land, farm house, plantation property) from Person resident in India or from Person resident outside India.

    4.  

    5. Funding:

      The source of funds to acquire/purchase the immovable property are:

      1. Foreign inward remittance
      2. Balances held in Non-Resident (Ordinary) account (NRO account)/Non-Resident (External) account (NRE account)/ Foreign Currency Non-Resident account (FCNR account)
      3. Housing loan can be availed to acquire the property from Authorised Dealer (AD) Bank or a housing finance institution in India.

       

    6. Payments cannot be made either by traveller’s cheque or by foreign currency notes or by any other mode.

    7. Transfer:

      NRI/OCI can transfer the property by way of sale or gift as under:

      1. Any immovable property to Person resident in India
      2. Immovable property to NRI/OCI (other than agricultural land, farm house, plantation property)
  2.  

  3. Joint Acquisition by the spouse of an NRI/OCI

    Foreign national resident outside India, can acquire one immovable property(other than agricultural land/ farm house/ plantation property) jointly with spouse who is NRI or OCI, subject to specified conditions.

  4. Acquisition by a Long Term Visa holder

    A person who is citizen of Afghanistan, Bangladesh or Pakistan belonging to minority (Hindu, Sikh, Buddhist, Jain, Parsis and Christians) residing in India under long term Visa can acquire one residential house and one immovable property for carrying on self-employment, subject to specified conditions.

  5. Acquisition/Transferby Foreign Embassies/Diplomats/Consulate Generals

    Foreign Embassy/Diplomat/Consulate General, can purchase/sell immovable property (other than agricultural land/plantation property/farm house) in India provided:

    1. Clearance from the Government of India, Ministry of External Affairs is obtained for such purchase/sale, and
    2. The consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through banking channels.
  6.  

  7. Acquisition/Transfer by Foreign Nationals (other than OCI cardholder)
    1. Foreign Nationals of 11 Countries:

      Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong or Democratic People’s Republic of Korea (DPRK),

      1. Irrespective of their residential status, cannot acquire or transfer immovable property in India, without prior RBI permission.
      2. However, they can acquire immovable property by way of lease, not exceeding five years.

       

    2. Foreign Nationals of other countries:

      1. Foreign nationals of non-Indian origin resident in India can acquire immovable property in India.
      2. Foreign nationals of non-Indian origin resident outside India cannot acquire/ transfer immovable property in India except by way of inheritance from a resident or by way of lease not exceeding five years.

       

  8. Acquisition of Immovable Property for carrying on permitted activity

    A person resident outside India who has established branch or liaison office in India with permission can acquire immovable property which is necessary for or incidental to carry on such activity. The person resident outside India can also mortgage the property.

    However, person of 11 countries mentioned in point E above will require prior RBI permission if such property is to be acquired for period exceeding five years.

    1. Exceptional Cases:

      1. A person resident outside India can continue to hold, transfer any immovable property situated in India if such property was acquired, held or owned by him/her when he/she was resident in India or inherited from a person resident in India.
      2. Any existing holding of immovable property in India by a person resident outside India made in accordance with the applicable regulation at the time of such acquisition would not require any further compliance.
    2. Typical Guidance:

      1. NRIs/PIOs can remit the sale proceeds of immovable property in India subject to certain conditions and payment of applicable taxes.
      2. Direct payment from a Person resident outside India to another Person resident outside India for acquisition of property in India is not permitted.
      3. It is advisable to obtain Foreign Inward Remittance Certificate (FIRC) and documents evidencing repayment of loan in foreign exchange to facilitate smoother repatriation process at later stage.

Content Partner- For any assistance / information on Tax, FEMA or related matters, you may write to our empaneled professional at nrihelp@gpkapadia.com

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