A person residing outside India, i.e., Nonresident Indian (NRI) or foreign national of Indian origin (PIO) or foreign national of Non-Indian origin are not allowed to purchase or transfer immovable property except as per FEMA act or any regulations made under FEMA by Reserve Bank of India (RBI). The FEMA empowers the RBI to frame necessary regulations for the sale and purchase of property by NRIs. The rules for Nonresident Indian and person of Indian origin are same for sale and purchase of the property.
A person residing outside India, i.e., Nonresident Indian (NRI) or foreign national of Indian origin (PIO) or foreign national of Non-Indian origin are not allowed to purchase or transfer immovable property except as per FEMA act or any regulations made under FEMA by Reserve Bank of India (RBI). The FEMA empowers the RBI to frame necessary regulations for the sale and purchase of property by NRIs. The rules for Nonresident Indian and person of Indian origin are same for sale and purchase of the property.
NRIs can purchase the residential or commercial property. It can be a constructed unit or plot/land. There is no restriction on the NRI property investment. The only restriction is on the purchase of an agricultural land which would include plantation property and farm house. All such property purchase excluding agricultural property is under general permission granted by RBI to NRIs (citizen of India) and PIO have to meet two conditions:
The general permission is not available for the purchased of agricultural land or plantation property or farm house in India. It does not mean that agricultural land cannot be bought by NRIs. It is possible but only with permission/specific approval of Reserve bank of India. One also needs to check the local state laws before purchase of agricultural land as some states allow only agriculturist or farmers to purchase agricultural land. Though, for purchases under general permission, intimation to RBI is not required.
There is no restriction on the sale of property to resident India by NRIs, i.e., type of property can be sold to resident Indian, POI and NRI. The only exception is that agricultural land or plantation property or farm house cannot be sold to NRI or PIO. The rule is different for PIO in this case though. A PIO can sell non agricultural property/land to resident Indian. But PIO cannot sell agricultural land or plantation property or farm house to a resident Indian. If a PIO inherited agricultural land from their forefathers then PIO can sell or gift agricultural land or plantation property or farm house only to resident Indian who is also citizen of India permanently in India. In general, PIO can sell the property to NRI and Resident Indian. If the buyer is also PIO then the prior approval from RBI is required.
Normally, there is no restriction to accept any type of property i.e. commercial or residential as a gift or acquire through inheritance. The donor can be resident Indian, PIO or NRI. The only exception is that agricultural land cannot be gifted to NRIs or PIO. Agricultural land or plantation property or farm house can only be inherited. For example, NRIs cannot purchase agricultural land but he/she is free to inherit the agricultural land. There is no restriction. Therefore, NRIs can sell the inherited agricultural land only to the resident Indian. In the case of PIO, rules are slightly different. PIO can inherit any immovable property including agricultural property only from a person who acquired this property in compliance with foreign exchange law or FEMA as applicable at the time of acquisition. A PIO can gift the residential or commercial property to Resident Indian, NRI (Citizen of India) or PIO.
Payment for acquisition of property can be made out of:
Such payments cannot be made either by traveler’s cheque or by foreign currency notes or by other mode than those specially mentioned above. A person resident outside of India who is a person of Indian origin (PIO) can acquire any immovable property in India other than agricultural land/farm house/plantation property:
By way of inheritance from any a person resident in India or a person resident outside India who had acquired such a property in accordance with the provisions of the foreign exchange la win force or FEMA regulations at the time of acquisition of the property.
A PIO may transfer any immovable property other than agricultural land/ plantation property/ farm house in India
A PIO may transfer agricultural land/ plantation property/ Farm house in India by way of sale or gift to resident in India who is a citizen of India.
Repatriation of sale proceeds In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by NRI / PIO, the authorized dealer will allow repatriation of sale proceeds outside India provided;
There is an ambiguity in FEMA notifications in the sense that the persons covered under 6(5) of FEMA, 1999 ( NRI who has purchased the property while he was resident) cannot remit sale proceeds of such property outside India except with the prior approval of Reserve Bank. However, on detailed analysis one would find that the Master Circular on Remittance Facilities for NRI/PIO mentions this prohibition very obliquely.
However, the repatriation needs to be done net of taxes. The NRI/PIO can freely rent out their immovable property and the rental income being a current account transaction can be freely remitted outside India.
The property owned by NRI/ PIO can also be mortgaged to AD/ housing finance institution or an Indian Bank without any approval of RBI. However, mortgage to a foreign bank would need the prior approval of RBI.
RBI Permission is required for Sale and Purchase of Property in India by
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