NRI

We Build trust not just homes

India, like many other parts of the world is zooming away in the face of a real estate boom. In India there is a real estate boom in every direction. Whether it is Bangalore, Pune, Calcutta, Chennai, Hyderabad or even the already sky high Mumbai and Delhi - the story is the same.

Now apartments are more than just houses. They are about lifestyle. So while the first housing colonies had nothing but a security guard, these new housing colonies have a gym (spa, Jacuzzi, steam), swimming pool (heated, lined with Italian marble). Some have a multiplex shopping complex. A few also offer a servant entrance. The next step is creating an ambience. What does one differentiate in a house? So you now have themed houses.

The concern is that in India, stock prices are at the height of a boom. The cycle of a boom in one sector translates into a boom in another sector with investors rushing to park their money in a safe place. Also, the foreign exchange glut in India fueled to a great extent by software engineers parking their dollar salaries in real estate (especially near the tech hubs). Low interest rates (relatively, as compared to 10 years back) over the last few years have made bank loans much easier.

Driven by positive growth in the economy, real estate in India is booming. The year 2006 started on a promising note when the Government of India opened the construction and development sector in February 2006, and allowed 100 per cent foreign direct investment (FDI) under the 'automatic route' in order to spur investment in the vital infrastructure sector. The government has thrown open the lucrative parts of the Indian realty market to global investors for the first time.

The relaxation of the FDI ceiling saw big names joining hands with the Delhi-based developments to announce India's largest FDI in the realty sector. Groups showing interest in India include major Indian and international companies.

The development of real estate in India focuses on two primary areas: retail and residential.

  • The global real-estate consulting group Knight Frank has ranked India 5th in the list of 30 emerging retail markets and predicted an impressive 20 per cent growth rate for the organized retail segment by 2010.
  • The organized segment is expected to grow from a mere 2 per cent to 20 per cent by the end of the decade, it is said.

The boom is also attracting interest from foreign players. In recent years, non-resident Indians (NRIs) have played a very important role in transforming the Indian real estate market. Opening-up of the Indian economy provided them with new opportunities and they have shown a great deal of confidence in the changed set up. Since 1994, NRIs have invested a sizeable amount, of which a big chunk has found its way into the property market. Participation by NRIs has brought about a lot of maturity in the market which in the past had solely banked on the actual users.

Do non-resident Indian nationals require special grants and permission to acquire Property in India?

No permission is required by non-resident Indian nationals to acquire immovable Property in India.

Are foreign nationals of Indian origin allowed to purchase property?

Yes, foreign nationals of Indian origin, whether resident in India or abroad, have been granted general permission to purchase immovable property in India

What should be the method of payment for purchase for any such property?

The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India

What way the Non-resident Indian can finance the property in India and what procedure is to be followed?

The purchase of the flats can be financed from the fresh remittance through the normal banking channels or from payment from original non-resident account or from Non-resident (External) Accounts. When the flat is under construction, it may be possible to obtain a home loan from the Indian Banks. To obtain this home loan a very simple procedure is to be followed. You can learn more about this from: sanjayg@hdfc.com

Can Non-resident Indians enter into an agreement when not present in India?

The non-resident Indians may enter into an agreement through their relatives by executing the Power of Attorney on a simple format in their favour.

Are there any formalities to be completed?

They are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Bombay within a period of 90 days from the date of purchase of immovable property.

Can such residential property be given on rent ?

Yes.

Can the rental income from such property be remitted abroad?

No. Such income cannot be remitted abroad and will have to be credited to the ordinary non-resident rupee account of the owner of the property. Question Answers Regarding Exchange Control Regulations in Respect of NRI investment in movable property

Do non-resident Indians i.e. Indian citizens require any specific permissions?

No specific permission is required by non-resident Indian nationals to acquire immovable Property in India other than agricultural/ plantation/ farmhouse.

Do non-resident Indians require permission to transfer immovable Indian property to a resident of India?

No specific permission is required by Non-resident Indians to transfer any immovable property in India to a person resident in India.

Do non-resident Indians require permission to transfer any other immovable property?

No specific permission is required for said transfer of any immovable property, other than agricultural, or plantation property or farm house.

Who is a PIO?

A person of Indian origin means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who:

  • Held an Indian Passport at any time, or
  • Who or whose father or paternal grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955.

How should the purchase of residential immovable property be paid for by NRI/ PIO under the general permission?

The purchase consideration should be met either out of inward remittance in foreign exchange through normal banking channels, or out of funds from NRE/FCNR(B)/NRO accounts maintained with banks in India.

Does a NRI/PIO, requires to have a company in India or abroad or both for purchasing of property?

No

Can NRI/ PIO's acquire or dispose residential property by way of gift?

Yes, NRIs and PIOs can freely acquire immovable property in India by way of gift either from

  • Person resident in India
  • NRI
  • PIO

However the property can only be commercial or residential.

Again NRIs and PIOs may gift residential/ commercial property to

  • person resident in India
  • NRI
  • PIO
  • Foreign national of non-Indian origin - with approval of RBI

Is there are any Lock in period for such investment?

Currently there is no lock in period.

Can rental Income be repatriated?

Repatriation of income derived out of letting of immovable property is permissible. NRI/PIO can rent out the property without approval of Reserve Bank. Rent received can be credited to NRO/NRE account or remitted abroad. Powers have been delegated to the Authorised Dealers to allow repatriation of current income like rent, interest, dividend etc. of NRI/PIO who do not maintain an NRO account in based on an appropriate certification by Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/ provided for.

Can NRI/PIO sell their purchased property without the permission of Reserve Bank?

Reserve Bank of India has granted general permission for sale of such property to the following categories:

  • To a NRI
  • To a PIO (If the seller is a PIO, then a prior approval is required from RBI)
  • To a person Resident of India

Can the sale proceeds of such property (if and when sold) be remitted/repatriated out of India?

Yes the sale proceeds can be remitted/repatriated out of India

In the event property acquired out of foreign exchange source i.e. remittance through normal banking channels/ debit to NRE/ FCNR(B) accounts, the amounts to be repatriated should not exceed the amount paid for such property from such source. However, repatriation of sale proceeds purchased out of foreign exchange is restricted to not more than two residential properties, in a block of one year, with a facility of crediting the Capital gain to the NRO account.

Again in the event the property was acquired out of Rupee source, an amount not exceeding USD one million, per financial year, subject to tax compliance, out of balance held in NRO account, may be remitted/repatriated.

In case of repatriation is there any tax liability to the Indian Government?

Yes, during repatriation Capital Gains (Long Term/Short Term) as applicable will be attracted.

Long Term Capital Gains : For properties held for 36 months or more are termed as
Long Term Capital Assets, and currently attracts a rate of 22.6%
(Fin. Year: 2007-08)

Short Term Capital Gains : For properties held for less than 36 months are termed as
Short Term Capital Assets, and currently attracts a rate of 33.9%

Disclaimer : The purpose of this FAQ is to provide the visitors a general understanding on the various issues relating to House Property. The above FAQ been prepared on the basis of advice received and may vary from person to person, based on facts of such case. Reasonable efforts have been taken in collecting, preparing and providing quality information, but we do not warrant or guarantee the accuracy, completeness, adequacy or currency of the information. The contents of the FAQ are subject to changes / amendments made by the CBDT / Finance Ministry.