Here is a guide to the main points for anyone wishing to sell property in India or buy property in India. Investors should look at all criteria detailed by the RBI both when buying property in India but also when selling property in India too.
Non-resident Indians (NRIs) and persons of Indian origin (PIOs)
Non-resident Indians (NRIs) and persons of Indian origin (PIOs) can invest in property in India. A NRI is a person who is not resident in India. According to the Foreign Exchange Management Act (FEMA), ‘person resident in India’ includes a person residing in India for more than 182 days during the course of the preceding financial year.
Not included
It does not include a person who has gone out of India on employment, business or vocation, or for any other purpose for an uncertain period. Also, a person who has come to stay in India other than on employment, business or vocation, or for any other purpose for an uncertain period. All other persons are NRIs. NRIs are permitted to buy and sell property in India. The acquisition and transfer of property by NRIs should be in accordance with the FEMA.
Rules that make it easy for NRIs to buy property in India
It makes sense for non-resident Indians (NRIs) and persons of Indian origin (PIOs) to invest in property in India. A NRI is a person who is not resident in India.
Also, a person who has come to stay in India other than on employment, business or vocation, or for any other purpose for an uncertain period. All other persons are NRIs. NRIs are permitted to buy and sell property in India. The acquisition and transfer of Indian property by NRIs should be in accordance with the FEMA.
The property in India should be purchased through a registered conveyance deed. It may also be purchased on a power of attorney. In the latter case, an agreement to sell and a power of attorney are executed by the seller in favour of the buyer.
RBI permission not needed
NRIs do not require permission of the Reserve Bank of India (RBI) to acquire residential property in India or commercial property in India.
The RBI has granted general permission to foreign citizens of Indian origin, whether resident in India or abroad, to purchase property in India for their bona fide residential purposes.
Payments
The payment has to be made either out of inward remittances in foreign exchange through normal banking channels or out of funds in a NRE or FCNR account maintained with a bank in India.
Declaration mandatory
Foreign citizens of Indian origin, purchasing residential property or real estate in India under the general permission are required to file a declaration with the central office of the RBI at Mumbai within 90 days from the date of purchase of the property or final payment of amount.This has to include a certified copy of the document evidencing the transaction and bank certificate regarding the amount paid.
Selling Property in India
Sale possible: The RBI has granted general permission for selling property in India without its permission. However, where the Indian property is purchased by another foreign citizen of Indian origin, the funds towards the purchase should either be remitted to India or paid out of the balance in a NRE or FCNR account.
Remittance of selling a property in India
The remittance proceeds of selling a property in India depends on the mode of acquisition – whether it was acquired out of funds remitted from outside or out of rupee funds. A property can be acquired out of rupee funds by a NRI before leaving India, or after leaving India, but from a savings bank account in an Indian bank out of income earned in India.
Selling a property in India and repatriation of funds
The proceeds from selling a property in India can be repatriated provided the amount does not exceed the amount paid to acquire the property in foreign exchange received from overseas, the amount paid from a FCNR account, or the foreign currency equivalent of the amount paid from funds held in a NRE account.
Two properties
On residential Indian properties purchased, the RBI considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of two properties. The balance amount of sale proceeds, if any, will have to be credited to an ordinary non-resident rupee account of the owner of the property.
Applications for the repatriation of sale proceeds are considered provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later.
Gifting Property
The RBI has also granted permission to foreign citizens of Indian origin to acquire or dispose of Indian properties – up to two houses – by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin whether resident in India or not, subject to compliance with applicable tax laws.
Also, it permits non-resident persons (foreign citizens) of Indian origin to transfer by way of gift property held by them in India to relatives and charitable organizations subject to the condition that the provisions of all other laws, including the Foreign Contribution (Regulation) Act, are complied with.
Tags: buying property in India, investing in India, NRI's, PIO's, selling property in India
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