March 2002 :: Page No.

24

Purchase And Transfer Of Immovable

Property In India By NRl
Acquisition and Transfer of Immovable Property in India by Non-Resident Indians
(NRIs) and persons of Indian Origin:
Various countries regulate the transactions in immovable property by their NonResidents and persons of its origin with certain restrictions because such
transactions have considerable impact on the economy.
In our country, earlier, the Foreign Exchange Regulation Act 1973 (FERA) was
regulating transactions in immovable property by Non-Resident Indians and
persons of Indian origin. This is replaced by Foreign Exchange Management Act,
1999 (Act 42 of 1999) (FEMA), which came into force from 1-6-2000. FEMA has
authorized the Reserve Bank of India to form guidelines with regard to acquisition
of immovable property by Non-Resident Indians and persons of Indian origin and
the guidelines dated 3-5-2000 stipulated by RBI called Foreign Exchange
Management (Acquisition and Transfer of Immovable Property in India)
Regulations 2000 came into force from 01-06-2000.
Any acquisition / transfer of immovable property in India other than detailed below
requires RBI prior approval. Those Guidelines refers to the acquisition of immovable
property in India by Indian citizens residing outside India and persons of Indian
origin residing outside India.
FEMA defines a person residing outside India as a person who is not a residing in
India, this category includes
1

Indian citizens who reside outside for employment carrying on any business,
vocation or any other purpose indicating indefinite period of stay outside
India.

2.

Indian citizens employed abroad with foreign government, international

agencies like UNO, IMF, World Bank etc.

3.

Employees of Central and State Governments deputed abroad for temporary

assignments or posted to their offices. This includes Indian diplomatic
missions.

An Indian citizen who goes abroad on student visa and takes up appointment on
completion of studies will be regarded as a person residing outside India only from
the time they take the job abroad.
Non-Resident Indians are not regarded as residents in India during their short visits
to India for holidays, business, etc.
A person of Indian origin means a person at any time holding Indian passport or
who or either of whose father, grandfather was a citizen of India, by virtue of
Constitution of India or Citizenship Act 1955. However, citizens of Pakistan.

Bangladesh. Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, does not fit into this
category.
Acquisition/ Transfer of Immovable Property by an Indian citizen residing
outside India:
Indian citizens residing outside India are prohibited from acquiring, agricultural,
plantation property and farmhouse and also from transferring agricultural,
plantation property, farmhouse to a person residing outside India, who is a citizen of
India, or to a person of Indian origin residing outside India. They may acquire any
immovable property in India and transfer property other than agricultural,
plantation, farmhouse to a person outside India, who is an Indian citizen or a person
of Indian origin residing outside India.
They can transfer any immovable property to a person residing in India, including
agricultural, plantation property, and farmhouse.
Acquisition/ transfer of immovable property in India by a person of Indian origin
residing outside India:
A person of Indian origin, residing outside India cannot acquire agricultural
plantation property farmhouse but acquire any other immovable property.
However, such an acquisition must be out of the funds received in India by way of
inward remittances from outside India, or from the fund of Non-Resident account
maintained in compliance of FEMA Act and RBI regulations.
He is also permitted to accept the immovable property except agricultural,
plantation property, farmhouse as a Gift from a resident in India; an Indian citizen
residing outside India; a person of Indian origin residing outside India. He is also
entitled to inherit any immovable property from a person residing outside India,
provided that a person residing outside India has acquired such immovable
property as per the provision of law in force at that time.
He is also permitted to inherit the immovable property from a person residing in
India.
He is not permitted to transfer by way of sale the agricultural, plantation property
farmhouse to persons residing in India but can transfer other immovable property
by way of sale.
However, restrictions on transfer by way of sale or gift of agricultural, plantation
property farmhouse does not apply if it is transferred to a person residing in India
who is a citizen of India.
He is permitted to transfer a residential or commercial property as a gift to a person
residing in India or to an Indian citizen residing outside India, or to a person of
Indian origin residing outside India.
Repatriation of Sale Proceeds:
Prior permission of Reserve Bank of India is required to repatriate the sale proceeds
of immovable property outside India, by a person residing outside India, or his
successor. The authorized dealer is permitted to allow repatriation of the sale
proceeds of immovable property in India except agricultural plantation property

farmhouse outside India to an Indian citizen residing outside India or to a person of

Indian origin on following conditions.
1.

The acquisition of the immovable property by the seller was in compliance of

law and regulations in force.

2.

The property was sold after three years from the date of acquisition or from the
date of payment of final installment of sale price whichever is later.

3.

The amount to be repatriated does not exceed the amount paid for acquisition
in foreign exchange received through normal banking channels or funds held in
foreign currency Non-Resident account or equivalent to foreign currency on the
date of payment if acquired through Non-Resident external account.

4.

If the sale proceeds are of residential property repatriation should not be more
than two properties.

There is complete prohibition against acquisition or transfer of immovable property

in India by the citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China,
Nepal, and Bhutan without the prior permission of Reserve Bank of India. However,
they may acquire or transfer immovable property on lease, which should not be
beyond five years.
Acquisition of Immovable Property for permitted activities:
Reserve Bank of India has accorded permission to a person residing outside India to
acquire immovable property in India, for the purpose of carrying on business or
other activities in India on the following conditions:
1.

The purpose is to open a branch or other place of business.

2.

The business or the activities is established in India as per Foreign Exchange

Management (Establishment in India of Branch or Offices or other place of
business) Regulation 2 000.

3.

The office is not a Liaison Office.

4.

There is need to acquire immovable property to carry on the activity.

5.

There is strict compliance of all applicable laws, rules, regulations and direction
in force.

6.

The person files Form No. IPI within ninety days from the date of such
acquisition.

7.

The immovable property acquired is transferred by way of mortgage to an

authorized dealer as security for any amount borrowed.

Housing loan in rupees to a Non-Resident

Non-Resident Indian or a person of Indian Origin residing outside India is
eligible to a housing loan to acquire residential accommodation in India subject
to the following conditions:
1.

Loan to be availed from an authorized dealer or Housing Finance Institution

approved by National Housing Bank.

2.

Amount of loan, margin to be met, and repayment period will be as applicable

to a person residing in India.

3.

The loan proceeds are not allowed to be credited to Non-Residential External

(NRE) /Foreign Currency Non-Resident (FCNR) / Non-Resident-nonrepatriable account of the borrower.

4.

Loan should be fully secured. The acquired property will have to be given as
security by equitable mortgage if needed, other assets of the borrower to be
given by way of lien.

5.

The repayment of loan, interest and other charges shall be by the borrower from
out of remittances outside India through normal banking channels. This may be
from the funds of the borrower in his Non-Resident External (NRE)/Foreign
currency Non-Resident (FCNR) Non-Resident Non-repatriable (NRNR)/NonResident-ordinary (NRO)/ Non-Residential Special Rupee (NRSR) account in
India. The rental income of the property acquired may also be used for
repayment.

6.

The interest charged to the loan shall be in conformity with RBI National
Housing Bank directives.

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