NRI GUIDE

PURCHASE / SALE OF IMMOVABLE PROPERTY BY NRI's

The provisions relating to purchase / sale of immovable property in India by Non-Resident Indians (NRI's) are provided in the Foreign Exchange Regulation Act, 1973 and the Income-Tax Act, 1961. As a consequence of the liberalization in Exchange Control policy and procedures, the government has brought about major legislative and policy changes to encourage NRI investments in real estate. The salient features of liberalized policy and updated position are discussed in detail below.

ACQUISITION OF IMMOVABLE PROPERTY BY NRI's HOLDING INDIAN PASSPORT

Non-Resident Indians holding Indian passports do not require prior permission of the Reserve Bank of India (RBI) to buy a residential or commercial immovable property in India. The purchase consideration may be paid either by remittance of funds from abroad through normal banking channels or out of Non-Resident External (NRE) / Non-Resident Ordinary (NRO) / Foreign Currency Non Residential (FCNR) account.

Non-Residents of Indian nationality do not require any permission for acquisition, transfer or disposal by way of gift of immovable property which is not a farmhouse or agricultural land or plantations property. Declaration of form IPI 7 (Immovable Property acquired by way of purchase In India) for acquisition of commercial property for carrying on any industrial, commercial or trading activity by their proprietary partnership firm in India is required to be filed with RBI within 90 days from the date of purchase

Under the general permission to Non-Resident Indians holding foreign passports, The Reserve Bank of India has allowed them to acquire, hold, transfer or dispose of by way of sale or inheritance, immovable properties situated in India. The general permission is granted, provided:

• The property is for the purchaser's bonafide residential use.
• The purchase consideration is met either from funds abroad through normal banking channels or out of NRE / FCNR account or out of FCNR special deposit account.
• Income accruing by way of rent from the properties purchased or acquired by inheritance will not be allowed to be repatriated abroad, even if the purchase consideration was met out of NRE / FCNR account.