Introduction

• Non-Resident Indians are allowed to make real estate investments in India without any cap on the quantity or the number of investments.

• All the Purchases and sales are bound by the rules and regulations under the FEMA (Foreign Exchange Management Act, 1999).
• To determine whether a person is non-resident or not Purpose of stay abroad is the prime criterion and the duration of stay in India is of limited significance.
• FEMA stipulates that before making a purchase a specified form called the IPI 7 needs to be filed with the central office of the RBI alongwith the title deed or any other Certified copy of the document proving that the NRI has executed an agreement to purchase property within the country.
• The form has to be filed within 90 days of the purchase of the property and has to be accompanied with a Bank Certificate stating the consideration paid for the purchase.
• NRI under FEMA regulations are allowed to sell property only after three years from the date of acquisition of property or from the date of payment of final installment of consideration for its acquisition, whichever is later.

Definitions
Non Resident
A person is a non-resident if,

• He stays abroad because he is employed there, or

• Carries on a business or pursues a vocation there, or
• If his stay outside India is for an indefinite period,

If there is any ambiguity regarding the above criteria, he will probably be considered a resident of India if he stays in India for more than 182 days during the course of the preceding financial year.

Non Resident Indian
A Non Resident Indian (NRI) is person who is,

• A non-resident Indian citizen, or

• A non-resident foreign citizen of Indian origin.

Person of Indian Origin (PIO)
A person is of Indian origin for acquiring immovable property in India if,

• He at any time, held Indian passport, or

• He or either his father or grandfather was a citizen of India,

(Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan are not considered to be of Indian origin).

Bank Accounts
The various kinds of non-resident bank accounts.
Repatriable (Rupee)

• SB

• CA
• FD
• FCNR(FD)

If there is any ambiguity regarding the above criteria, he will probably be considered a resident of India if he stays in India for more than 182 days during the course of the preceding financial year.

Non-repatriable

• NRO (SB, CA)

• FCNR (NR)
• NRNR
• FCNR (B)

NRIs can maintain accounts in rupee as well as foreign currency. Accounts in foreign currencies can, however, be maintained with authorized dealers only. NRO and NRE accounts can be maintained in current/ savings/ fixed deposits form while NRNR account can be only in fixed term deposits.

Property
NRIs (being Indian citizens) are allowed to invest in immovable property, without RBI's permission in India. For foreign nationals of Indian origin (whether resident in India or not), RBI has granted general permission to acquire or dispose off any immovable property, other then agriculture land/ farm house/ plantation property, subject to certain conditions.

Residential property
The notification issued by RBI dated 26th May, 1993 gives general permission to foreign citizens of Indian origin

• to acquire by way of purchase or inheritance

• to dispose off by way of sale

any immovable property, other than agriculture land/ farm house/ plantation property.

• to acquire by way of gift, and

• to dispose off by way of sale or gift any residential property, subject to certain conditions.

In case of purchase, the conditions are:

• The consideration is paid out of foreign remittance or out of NRE or FCNR account.

• Purchases of residential property is only for bona fide residential purpose.

In case of acquisition by way of gift, the conditions are:

• It is effected between "relatives" (as defined under Companies Act, 1956).

• In case of persons resident outside India, they can acquire a maximum of two properties, without RBI permission.
• Gift-tax liability, if any, has been paid.

In either case, a declaration in form IPI-7 with certified copy of conveyance deed and a certificate from bank regarding payment particulars has to bee filled by the purchaser within 90 days of acquisition to the Controller, Exchange Control department, foreign Investment division (III), RBI, Central office, Mumbai.

Commercial property
Foreign citizens of Indian origin could acquire and sell commercial property in India subject to certain conditions.

• Purchase consideration is paid out of foreign remittance or out of funds in NRE/ FCNR account.
• Declaration in form IPI7 is to be submitted within 90 days to RBI.
• Repatriation (form IPI to be used) to the extent of original investment made shall only be permitted subject to fulfillment of following conditions:

• Property has been purchased on or after May 26, 1993.

• The property is not transferred before three years from the date of purchase deed or from the date of payment of final installment, whichever is later.

• The balance sale proceed should be credited to NRO account.

Letting out of the property
Letting of the property is allowed through the general permission given by the RBI.

Repatriation
Repatriation of sale proceeds is permitted with prior approval of RBI, provided

• Such property is purchased on or after May 26, 1993.

• Such sales take place after three years from the date of acquisition or from the date of payment of final installment of consideration, whichever is later.
• Repatriation is limited to the extent of foreign exchange paid for acquisition of immovable property (in case of sale of residential properties, the amount equivalent in foreign exchange paid for acquisition of maximum two properties).

Applications for necessary permission for remittance of sale proceeds should be made in form IPI 8 to the Central Office of Reserve Bank of India at Mumbai within 90 days of the sale of the property.

Note: An Overseas Corporate Body even if it remits fund from abroad would still require RBI permission to acquire property in India.

Loans to NRIs for acquisition of a flat/ house
Authorized dealers can grant loans/ overdrafts to NRIs holding Indian passport against security of immovable property proposed to be acquired by them. Certain financial institutions also provides housing finance eg HDFC, LIC Housing Finance Ltd. Repayment of the loan should be made within a period not exceeding 15 years out of inward remittance through banking channels or out of funds held in the investors' NRE/ FCNR/ NRO accounts.