Non-Resident Indians (NRIs), under RBI guidelines, can purchase certain kinds of properties, though other forms may require special permissions. Thus every NRI, interested in buying property in India, must be aware of the provisions related to purchase or ownership of immovable property in India under Foreign Exchange Management Act (FEMA). Persons of Indian Origin (PIOs) and NRIs are always treated the same when it comes to investing in real estate.
Non Resident Indians (NRIs) can avail home loans for the purchase of flats, bungalows and villas in India. They need copies of valid passport, statements of non-resident external (NRE) or non-resident ordinary (NRO) accounts, salary certificate, last six months bank account statement/passbook, work experience certificate and a valid job contract or work permit. A person must be employed for at least two years. Businessmen and self-employed individuals need to show proof of income.
The NRI can even gift or transfer any property to any NRI, provided it's not a farmhouse, plantation property or agricultural property.
Who is a NRI ?
As defined by the Foreign Exchange Management Act of 1999 (FEMA), Non Resident Indian (NRI) is a citizen of India, who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Non-resident foreign citizens of Indian Origin are treated at par with Non Resident Indian (NRIs).
What way the Non-Resident Indian can finance the flat?
NRI/PIO can avail of housing loan in Rupees from an Authorized Dealer or a Housing Finance Institution subject to certain terms and conditions laid down in Regulation 8 of Notification No. FEMA 4/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Borrowing and lending in rupees) Regulations, 2000, as amended from time to time. Authorized Dealers/ Housing Finance Institutions can also lend to the NRIs/ PIOs for the purpose of repairs/renovation/ improvement of residential accommodation owned by them in India. Such a loan can be repaid (a) by way of inward remittance through normal banking channel or (b) by debit to the NRE / FCNR (B) / NRO account of the NRI / PIO or (c) out of rental income from such property; or (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.
Can Non-Resident Indians staying abroad purchase property through an agent or through a power of attorney?
The Non-Resident Indians who are staying abroad may enter into an agreement through their relatives and/ or by executing the Power of Attorney in their favour as it is not possible for them to be present for completing the formalities of purchase (negotiating with the builder or Developer, drafting and signing of agreements, taking possession, etc.). These formalities can be completed through some known person who can be given the Power of Attorney for this purpose. Power of Attorney should be executed on the stamp paper before the proper authorities in foreign countries. Power of Attorney cannot be drafted on the stamp paper bought in India.
Can NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds?
Yes, NRI/PIO can rent out the property without the approval of the Reserve Bank. The rent received can be credited to NRO / NRE account or remitted abroad. Powers have been delegated to the Authorized 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.
What are the provisions for remittance of sale of proceeds of any immovable property by Non-Resident Indians/ Person of Indian origin, Resident outside India?
NRI/PIO may repatriate the sale proceeds of immovable property a) If the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels/by debit to NRE/FCNR (B) account. The amount to be repatriated should not exceed the amount paid for the property: 1.In foreign exchange received through normal banking channel 2. By debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account. Repatriation of sale proceeds of residential property purchased by NRI/PIO out of foreign exchange is restricted to not more than two such properties. Capital gains, if any, may be credited to the NRO account from where the NRI/PIO may repatriate an amount up to $1 million, per financial year, as discussed below. b) If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to $1 million, per financial year, out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance.
What is the position regarding Refund of purchase consideration on account of non-allotment of flats/ plots/ cancellation of bookings/ deals in respect of immovable property purchased by NRIs/ PIOs in India?
With a view to allow credit to NRE/ FCNR account of refund of purchase consideration by seller on account of cancellation of bookings/ deals for purchase of Residential, commercial property, Reserve Bank clarified that it will be in order for authorized dealers to allow Non-Resident Indians/ Persons of Indian Origin to credit refund of application/ earnest money/ purchase consideration made by the housing building agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings/ deals for purchase of Residential commercial property, together with interest, if any (net of income tax payable thereon),to NRE/ FCNR account, provided, the original payment was made out of NRE/ FCNR account of the account-holder or remittance from outside India through normal banking channels and the authorized dealer is satisfied about the genuineness of the transaction.