Purchase/Sale of Immovable Property by NRIs

   The provisions relating to purchase/sale of immovable property in India by Non-Resident Indians (NRIs) are provided in the Foreign Exchange Regulation Act, 1973 and the Income-Tax Act, 1961. As a consequence on 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 NRIs holding Indian passport:

   Non-Resident Indians holding Indian passport do not require prior permission of Reserve Bank of India 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 NRE/NRO/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 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.

Acquisition of immovable property by foreign citizens of Indian origin

   Under the general permission to Non-Resident Indians holding foreign passport, 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:

1.The property is for the purchaser’s bonafide residential use;
2.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.
3.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.

Sale of Immovable Property - RBI permission

   The Reserve Bank of India has granted general permission to non-residents holding Indian passports and foreign citizens of Indian origin, whether resident in India or not, to dispose of by sale or inheritance immovable properties situated in India subject to certain conditions. However, such property can be sold to another foreign national of Indian origin provided funds towards purchase consideration are either remitted to India or paid out of balances in NRE/FCNR accounts.

   It is however, necessary for such persons purchasing the property to submit to the chief General Manager, Exchange Control Department, Foreign Investment Division, Central Office, Reserve Bank of India, Bombay, a declaration in the prescribed form IPI-7 within a period of 90 days from the date of purchase.