With India’s booming property market, and improving job prospects, many NRIs are keen to buy a house or commercial property in India, and become part of India’s success story.
As per RBI rules, NRIs or persons of Indian origin (PIO) are permitted to buy and sell properties in India. However, it is important to understand what is allowed and what isn’t.
Who is an NRI
To understand who is an NRI for the purposes of investment, we must see who is a person resident in India.
The remittance of money to and from India is governed by the Foreign Exchange Management Act (FEMA), which defines person resident in India as a person residing in India for more than 182 days during the course of the previous financial year.
According to this definition, it does not include a person who has gone out of India for job, business or vocation, or for any other purpose for an uncertain period.
Not just that. A person who has come to stay in India other than on employment, business or vocation, or for any other purpose for an uncertain period is a resident of India. As such, any person who does not meet this definition is an NRI. Basically, an NRI as someone who is not resident in India.
I am an NRI, can I buy property in India?
Yes, if you meet the NRI definition just discussed. You can not only buy but also sell property in India, as long as the transaction is carried out in compliance with the FEMA.
These provisions are simple to follow. Buy the house or property with a registered conveyance deed. You can also buy it on a power of attorney, when an agreement to sell and a power of attorney are executed by the seller in favour of the buyer.
Do I need to get RBI permission?
No. You don’t have to seek permission from India’s federal bank to buy residential or commercial property in India.
Whether resident in India or abroad, foreign citizens of Indian origin have RBI’s blanket permission to buy property in India. This permission is subject to certain conditions.
The property must be for their bona fide residential purposes of the buyer. Also, the buyer must pay either out of inward remittances in foreign exchange through normal banking channels or out of funds in a NRE or FCNR account maintained with a bank in India.
There is one more condition – declaration. The buyer has to file a declaration with the RBI’s head office in Mumbai within 90 days from the date of purchase of the property or final payment of amount.
Such declaration should include a certified copy of the document evidencing the transaction and bank certificate regarding the amount paid.
Now I want to sell my house in India
India’s federal bank (RBI) has made this also a breeze. NRIs can sell their property in India subject to certain conditions. If the property is bought by another foreign citizen of Indian origin, the purchase consideration should be either remitted to India or paid out of the balance in a NRE or FCNR account.
Can I remit the sale proceeds outside India?
Yes, you can take the sale proceeds outside India if:
- the amount does not exceed the amount paid to buy the property in foreign exchange received from overseas,
- the amount paid from a FCNR account, or
- the foreign currency equivalent of the amount paid from funds held in a NRE account.
In relation to residential properties, the RBI considers applications for repatriation of sale proceeds up to the consideration amount remitted in foreign exchange for the acquisition of two properties.
If the sales proceeds exceed the amount brought into the country to buy the house, then the excess of sale proceeds are to be credited to an ordinary non-resident rupee account of the owner of the property.
But wait. There’s one more provision to consider. You can repatriate funds if the sale takes place after three years from the date of final purchase deed or from the date of payment of final instalment, whichever is later.
What about house as a gift?
NRIs, PIOs or foreign citizens of Indian origin can receive a house as a gift. They can also gift a house in India. But only two houses at the most.
The gift can be received from or given to a relative who may be an Indian citizen or a person of Indian origin whether living in India or not. Of course, they have to follow the tax laws of the country.
Can I get a loan to buy a house in India?
Of course you can. Again, the apex bank (RBI) has allowed a selected housing finance banks to provide housing loans to non resident Indians. The loan is avialble for buying a house for self-use.
As per RBI rules, the nature and amount of the loan will be similar to those for residents. The maximum repayment period allowed in 15 years.