Acquisition and Transfer of Immovable Property in India by a Person Resident outside India


Q1.: Where can one find regulations/directions issued by Reserve Bank for acquisition and transfer of immovable property in India by a person resident outside India?
Ans.: Regulations regarding acquisition and transfer of immovable property in India by a person
resident outside India has been notified vide RBI Notification No. FEMA 21/2000-RB dated May 3, 2000
as amended vide Notification No. FEMA 64/2002-RB dated June 29, 2002 and Notification
No. FEMA 65/2002-RB dated June 29, 2002 and relevant directions issued in the form of
A.P. (DIR Series) Circulars. These are available on RBI website: www.fema.rbi.org.in

Q2.: Under the extant foreign exchange regulations to whom is general permission
available for purchase immovable property in India?
Ans.: General Permission is available to purchase only a residential/commercial property in India
to a person resident outside India who is a citizen of India (NRI) and who is a Person of Indian Origin (PIO).

Q3.: Who is a Person of Indian Origin (PIO)?
Ans.: For the purpose of acquisition and transfer of immovable property in India, a PIO means
an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or
Iran or Nepal or Bhutan), who (i) at any time, held Indian passport; or (ii) who or either of whose
father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship
Act, 1955 (57 of 1955).

Q4.: Is NRI/PIO who has purchased residential/commercial property under general permission
required to file any documents with Reserve Bank of India?
Ans.: NRI/PIO who has purchased residential/commercial property under general permission is not
required to file any documents with the RBI.

Q5.: Is there any restriction on number of residential/commercial property that NRI/PIO can
purchase under the general permission available?
Ans.: There is no restriction on number of residential/commercial property that NRI/PIO can purchase
under the general permission available.

Q6.: Can NRI/PIO acquire residential/commercial property by way of gift under the
general permission available?
Ans.: Yes. Under general permission available NRI/PIO may acquire residential/commercial property
by way of gift from a person resident in India or a NRI or a PIO.

Q7.: Can a person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin)
hold any immovable property in India acquired by way of inheritance from a person resident in India?
Ans.: Yes. A person resident outside India can hold immovable property acquired by way of inheritance
from a person resident in India as per the provisions of Section 6(5) of the Foreign Exchange Management
Act, 1999.

Q8.: Under general permission available to whom can NRI transfer by way of sale his residential/commercial property?
Ans14.: A: NRI can transfer by way of sale residential/commercial property in India to a person
resident in India or to a NRI or a PIO.

Q9.: Under general permission available to whom can a PIO transfer his residential/commercial
property by way of sale?
Ans.: PIO can transfer by way of sale residential/commercial property in India only to a person resident in India.

Q10.: Are NRIs permitted to maintain accounts in rupees and in foreign currency?
Ans.: Yes. Accounts can be maintained by NRIs in rupees as well as in foreign currency. Accounts in foreign currencies can, however, can be maintained with authorities’ dealers only.

Q11.: What are the different types of rupee accounts permitted to be maintained?
Ans.: Three types of accounts viz. Non resident (External) Rupee Accounts (NRE account), Ordinary Non-Resident Rupee Account (NRO A/c) and Non-Resident (Non- repatriable) Rupee Deposit accounts (NRNR) are permitted to be maintained.
Frequently Asked Questions (FAQs)
Acquisition of Immovable Property in India

Q.12.:  Who can purchase immovable property in India?
Ans.: Under the general permission available, the following categories can freely purchase immovable property in India:
i) Non-Resident Indian (NRI)- that is a citizen of India resident outside India
ii) Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who
1. at any time, held Indian passport, or
2. who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
The general permission, however, covers only purchase of residential and commercial property and not for
purchase of agricultural land / plantation property / farm house in India.


Q.13. Do any documents need to be filed with Reserve Bank of India after purchase?
Ans.: No. An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents with the Reserve Bank.

Q.14 Can a foreign national who is a person resident in India purchase immovable property in India?
Ans.: Yes, but the person concerned would have to obtain the approvals, and fulfil the requirements if any, prescribed by other authorities, such as the concerned State Government, etc However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank. Such requests are considered by Reserve Bank in consultation with the Government of India.

Q.15 Can an office of a foreign company purchase immovable property in India?
Ans.: A foreign company which has established a Branch Office or other place of business in India, in accordance with FERA / FEMA regulations, can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. The payment for acquiring such a property should be made by way of foreign inward remittance through proper banking channel. A declaration in form IPI should be filed with Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorised Dealer as a security for other borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of Reserve Bank. Further, acquisition of immovable property by entities who had set up Branch Offices in India and incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank to acquire such immovable property. However, if the foreign company has established a Liaison Office, it can not acquire immovable property . In such cases, Liaison Offices, can take property by way of lease not exceeding 5 years.


Q.16. Can NRI / PIO avail of loan from an authorised dealer for acquiring flat / house in India for his own residential use against the security of funds held in his NRE Fixed Deposit account / FCNR (B) account?
Ans.: Yes, such loans are subject to the terms and conditions as laid down in Schedules 1 and 2 to Notification No. FEMA 5/2000-RB dated May 3, 2000 as amended from time to time. However, banks cannot grant fresh loans or renew existing loans in excess of Rupees 20 lakh against NRE and FCNR(B) deposits either to the depositors or to third parties [cf. A.P. (DIR Series) Circular No. 29 dated January 31, 2007].

Such loans can be repaid

(a) by way of inward remittance through normal banking channel or
(b) by debit to his NRE / FCNR (B) / NRO account or
(c) out of rental income from such property.
(d) by the borrower's close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower's loan account.

Repatriation:

(a). In case the amount has been received from inward remittance or debit to NRE/FCNR(B)/NRO account for acquiring the property or for repayment of the loan, the principal amount can be repatriated outside India.
For this purpose, repatriation outside India means the buying or drawing of foreign exchange from an authorised dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorised dealer from which it can be converted in foreign currency

(b) in case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India ( as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account.
NRI/PIO are also allowed by the Authorised Dealers to repatriate an amount up to USD 1 million per financial year out of the balance in the NRO account for all bonafide purposes to the satisfaction of the authorised dealers, subject to tax compliance.

Q.17. Can NRI / PIO, avail of housing loan in rupees from an authorised dealer or housing finance institution in India approved by the National Housing Bank for purchase of residential accommodation or for the purpose of repairs / renovation / improvement of residential accommodation ? How can such loan be repaid?
Ans.: Yes, NRI/PIO can avail of housing loan in rupees from an Authorised Dealer or housing finance institution subject to certain terms and conditions. (Please refer to Regulation 8 of Notification No. FEMA 4/2000-RB dated 3.5.2000 and A.P. (DIR) Series Circular No. 95 dated April 26, 2003).
Such a loan can be repaid

(a) by way of inward remittance through normal banking channel or
(b) by debit to his NRE / FCNR (B) / NRO account or
(c) out of rental income from such property.
(d) by the borrower's close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower's loan account.

Q.18. If a Rupee loan was taken by NRI/PIO from Authorised Dealer or housing finance institution for purchase of residential property can an NRI / PIO repatriate the sale proceeds of such property?
Ans.: Yes, provided the loan has been subsequently repaid by remitting funds from abroad or by debit to NRE/FCNR(B) accounts (Please see A.P. (DIR) Series Circular No. 101 dated 5.5.2003)

Q.19. Can Foreign Embassies / Diplomats / Consulate General purchase / sell immovable property in India ?
Ans.: Yes, Foreign Embassies / Diplomats / Consulate Generals can purchase and sell any immovable property other than agricultural land / plantation property / farm house in India with prior clearance from the Government of India, Ministry of External Affairs. The payment should be made by foreign inward remittance through normal banking channel.

Q.20. Can NRI / PIO rent out the residential / commercial property purchased out of foreign
exchange / rupee funds?
Ans.: Yes, NRI/PIO can rent out the property without the approval of the Reserve Bank. Rent received can be credited to NRO / NRE account or remitted abroad. Powers have been delegated to the Authorised Dealers to allow repatriation of current income like rent, dividend, pension, interest, etc. of NRIs/PIO who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.[cf. A.P. (DIR Series) Circular No. 45 dated May 14, 2002].

Q.21. Can a person who had bought immovable property when he was a resident, continue to hold such property even after becoming an NRI/PIO?
Ans.: Yes, he can continue to hold the residential / commercial property / agricultural land/ plantation property / farm house in India without the approval of the Reserve Bank.

Q.22. Can foreign nationals of non-Indian origin resident in India or outside India who had earlier acquired immovable property under FERA with specific approval of Reserve Bank continue to hold the same? Can they transfer such property?
Ans.: Yes, they may continue to hold the immovable property. However, they can transfer the property only with the prior approval of Reserve Bank.


Q.23. What is meant by a person resident in India ?
Ans.: Under FEMA, a person resident in India is defined as a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year (April-March) and who has come to or stays in India either for taking up employment, carrying on business or vocation in India or for any other purpose, that would indicate his intention to stay in India for an uncertain period. In other words, to be treated as `a person resident in India' under FEMA, a person has not only to satisfy the condition of the period of stay (being more than 182 days during the course of the preceding financial year) but has also to comply with the condition of the purpose / intention of stay.


Q.24. If a foreign national is a person resident in India as per the provisions of Section 2(v) (i)B of the FEMA, 1999, does he require approval of Reserve Bank to purchase any immovable property in India ?
Ans.: A foreign national resident in India does not require approval from Reserve Bank from FEMA angle, but approvals if any required in terms of regulations prescribed by other authorities such as the concerned State Government etc. will have to be obtained by him / her. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan requires specific prior approval of Reserve Bank.