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FAQs on acquisition of residential / commercial premises in India by Non-Resident
Indians ("NRI")
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1. Who is a NRI under the provisions of Foreign Exchange Management Act?
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Generally, an Indian Citizen 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 or a person who is not resident in India
for a period over 182 days is a non-resident Indian. Persons posted in U.N. organizations
and officials deputed abroad by Central/State Governments and Public Sector undertakings
on temporary assignments are also treated as non-residents.
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2. Do non-resident Indian citizens require permission of Reserve Bank to acquire
residential/commercial properly in India?
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No.
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3. Do foreign citizens of Indian origin require permission of Reserve Bank to
purchase immovable property in India for their residential use?
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Yes. However, Reserve Bank has granted general permission to foreign citizens of
Indian origin, whether resident in India or abroad, to purchase immovable property
in India for their bona fide residential purpose. They are, therefore, not required
to obtain separate permission of Reserve Bank.
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4. In what manner the purchase consideration for the residential immovable property
should be paid by foreign citizens of Indian origin under the general permission?
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The purchase consideration should be met either, out of inward remittances in foreign
exchange through normal banking channels or out of funds from NTE/FCNR accounts
maintained with banks in India.
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5. What are the formalities required to be completed by foreign citizens of
Indian origin for purchasing residential immovable property in India under the general
permission.
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They are required to file a declaration in form IPI 7 with the Central Office of
Reserve Bank at Mumbai within a period of 90 days from the date of purchase of immovable
property or final payment of purchase consideration along with a certified copy
of the document evidencing the transaction and bank certificate regarding the consideration
paid.
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6. Can such property be sold without the permission of Reserve Bank?
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Yes. Reserve Bank has granted general permission for sale of such property. However,
where another foreign citizen of Indian origin, funds towards the purchase consideration
purchase the property should either be remitted to India or paid out of balances
in NRE/FCNR accounts.
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7. Can sale proceeds of such property if and when sold be remitted out of India?
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In respect of residential properties purchased on or after 26th May, 1993 Reserve
Bank considers applications for repatriation of sale proceeds up to the consideration
amount remitted in foreign exchange for the acquisition of the property for two
such properties. The balance amount of sale proceeds if any or sale proceeds in
respect of properties purchased prior to 26th May, 1993, will have to be credited
to the ordinary non-resident rupee account of the owner of the property.
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8. Are any conditions required to be fulfilled if repatriation of sale proceeds
is desired?
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Applications for repatriation of sale proceeds are considered provided the sale
takes place after three years from the date of final purchase deed or from the date
of payment of final installment of consideration amount, whichever is later.
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9. What is the procedure for seeking such repatriation?
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Applications for necessary permission for remittance of sale proceeds should be
made in form IPI 8 to the Central Office of Reserve Bank at Mumbai within 90 days
of the sale of the property.
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10. Can foreign citizens of Indian origin acquire or dispose of residential
property by way of gift?
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Yes. Reserve Bank has granted general permission to foreign citizens of Indian origin
to acquire or dispose of properties up to two houses by way of gift from or to a
relative who may be an Indian citizen or a person of Indian origin whether resident
in India or not, provided gift tax has been paid.
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11. Can foreign citizens of Indian origin acquire commercial properties in India?
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Yes. Under the general permission granted by Reserve Bank properties other than
agricultural land/farm house/plantation property can be acquired by foreign citizens
of Indian origin provided the purchase consideration is met either out of inward
remittances in foreign exchange through normal banking channels or out of funds
from the purchasers' NRE/FCNR accounts maintained with banks in India and a declaration
is submitted to the Central Office of Reserve Bank in form IPI 7 within a period
of 90 days from the date of purchase of the property/final payment of purchase consideration.
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12. Can they dispose of such properties?
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Yes.
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13. Can sale proceeds of such property be remitted out of India?
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Yes. Repatriation of original investment in respect of properties purchased by foreign
citizens of Indian origin on or after 26th May 1993 will be allowed to be remitted
up to the consideration amount originally remitted from abroad provided the property
is sold after a period of three years from the date of the final purchase deed or
from the date of payment of final installment of consideration amount, whichever
is later. Applications for the purpose are required to be made to the Central Office
of Reserve Bank within 90 days of the sale of property in form IPI 8.
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14. Can the properties (residential/commercial) be given on rent if not required
for immediate use?
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Yes. Reserve Bank has granted general permission for letting out of any immovable
property in India. The rental income or proceeds of any investment of such income
have to be credited to NRO account.
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15. Can NRIs obtain loans for acquisition of a house/flat for residential purpose
from financial institutions providing housing finance?
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Reserve Bank has granted general permission to certain financial institutions providing
housing finance e.g. HDFC,LIC Housing Finance Ltd., etc. to grant housing loans
to non-resident Indian nationals for acquisition of houses/flats for self-occupation
subject to certain conditions.
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16. Can authorized dealer grant loans to NRIs for acquisition of a flat/house
for residential purposes?
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Authorized dealers have been granted permission to grant loans up to non-resident
Indian nationals for acquisition of house/flat for self-occupation on their return
to India subject to certain conditions. Repayment of the loan should be made within
a period not exceeding 15 years out of inward remittance through banking channels
or out of funds held in the investments' NRE/FCNR accounts.
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17. Can Indian companies grant loans to their NRI staff?
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Reserve Bank permits Indian firms/companies to grant housing loans to their employees
deputed abroad and holding Indian passport subject to certain conditions.
Source: Reserve Bank of India
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18. While purchasing real estate most developers demand a Power of Attorney
in their favor, is there a way to avoid it?
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One can choose not to grant the Power of Attorney (POA) to the developers. However
this will mandate the mailing of all documents to your foreign residence and associated
time delays. A good compromise is to grant the POA to the builder only for specific
necessary items.
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