NRI

For overseas Indians, India offers a tremendous opportunity for investment and wealth building as India is slated to grow at the rate of 8%-10% for the next few decades.
Options available for NRIs:
As per the Government of India, NRIs are given the following facilities as far as investment is concerned.
1. Bank accounts in India
2. Investment in securities and debts
3. Investment in immovable properties such as real estate

Types of Accounts
NRE Account: This is a rupee denominated account. The interest earned is tax free. The amount in the account is repatriable.

NRO Account: This is also a rupee denominated account. The interest earned is taxable. The repatriation limit is 1 million USD in a year.

NRNR Account: This is a term deposit account with 6 months to 3 years term which can be extended. Only the interest can be repatriated. The interest is not taxable.

FCNR Account: This is a term deposit accounts for maximum of 3 years in foreign currency denominated form. The foreign currencies allowed are US, Australian, Canadian dollar, Euro, Pound, and Japanese Yen.

Investment in securities and debt: Indian market has been a darling for foreign investors for quite a few years. The market will keep its momentum as India is expected to grow with a respectable rate for a few decades. NRIs can invest in securities and debt instruments to exploit the opportunities presented by Indian stock market. NRIs can invest in stocks and debt funds directly or in mutual fund.
Government of India has allowed NRIs to invest in Indian market directly or through portfolio investment scheme. It has allowed the following types of investment.
Investment in stocks (especially secondary market) through portfolio investment scheme (PIS). This allows NRIs to invest in Indian security market without obtaining any permission from the RBI or the Government. In some cases, however, they need permission from FIPB (Foreign Investment Promotion Board) in case of investment in agriculture or plantation activities. Investing in securities is done through portfolio investment scheme. As per this scheme, NRIs can select one branch designated by RBI for transaction related to investment. The transaction then can happen through the specified branch for stocks and convertible debentures. This can be repatriable or non-repatriable depending upon the situation.

Investment with Repatriation clause: Investment in domestic mutual fund, bonds, term deposit with companies for at least 3 years, and Government securities are allowed with repatriation benefits.

Investment without repatriation benefit: Investment in the form of capital contribution in any proprietary or partnership firm is allowed but it is not repatriable. NRIs can also invest in new issues through this route.

Other investment: Other investment such as money market mutual funds, deposit, non-convertible debentures, and commercial paper are allowed but without any repatriation benefit.

Investment in immovable assets: NRIs can invest in real estate. They do not need any permission to invest in real estate except in cases where they want to acquire farm land, plantation, and agriculture land. The repatriation clause needs to be looked at in individual cases. The Government allows up to 100% investment in real estate development (including housing societies and commercial space) as well as financing of housing and commercial development. There are facilities available for returning NRIs so that their investment in foreign countries are not disturbed. They can also open resident foreign currency account to freely move money between NRE/FCNR accounts.

Important points: NRIs can invest in stocks by directly buying stocks of specific company or through mutual fund.Indian market offers variety of mutual funds such as sectoral fund that invests in a specific sector, mid-cap fund that invests in mid cap firms, growth fund that invests in emerging companies, value fund that invests in stable and old companies that give consistent results. There are India specific funds available for investment.
It is important to ascertain the credentials of advisor for any investment requirement. NRIs are considered easy source of money and there is no dearth of quakes to exploit the situation.
You should apply for a PAN card and then open demat and trading account linked to your NRE/NRO account which can be used for trading purposes. If you are concerned about repatriation clauses, make sure you understand the types of accounts and policies where repatriation is allowed. Open the appropriate account and invest in right instruments to avail repatriation benefits. In most if the cases, repatriation is allowed after a lock in period of 3 years.
Acquisition of immovable property in India by persons resident outside India (foreign national) is regulated in terms of section 6 (3) (i) of the Foreign Exchange Management Act (FEMA), 1999 as well as by the regulations contained in the Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time. Section 2 (v) and Section 2 (w) of FEMA, 1999 defines `person resident in India' and a `person resident outside India', respectively. Person resident outside India is categorized as Non- Resident Indian (NRI) or a foreign national of Indian Origin (PIO) or a foreign national of non-Indian origin.
The Reserve Bank does not determine the residential status. Under FEMA, residential status is determined by operation of law. The onus is on an individual to prove his / her residential status, if questioned by any authority.
1.A person resident in India who is not a citizen of India is also covered by the relevant Notifications.

2. In terms of the provisions of Section 6(5) of FEMA 1999, a person resident outside India can hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was a resident in India or inherited from a person who was a resident in India.

3. The regulations under Notification No. FEMA 21/2000-RB dated May 3, 2000, as amended from time to time, permit a NRI or a PIO to acquire immovable property in India, other than agricultural land or plantation property or farm house. Further, foreign companies who have been permitted to open a Branch or Project Office in India are also allowed to acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. Such dispensation is however not available to entities which are permitted to open liaison offices in India.

4. The restrictions on acquiring immovable property in India by a person resident outside India would not apply where the immovable property is proposed to be acquired by way of a lease for a period not exceeding 5 years or where a person is deemed to be resident in India. In order to be deemed to be a person resident in India, from FEMA angle, the person would need to comply with the provisions of Section 2(v) of FEMA 1999. The Press Release dated February 1, 2009 issued by Government of India in this regard is enclosed as Annex.
Note: Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan cannot acquire or transfer immovable property in India, (other than on lease not exceeding five years) without the prior permission of the Reserve Bank.

5. NRIs/ PIOs are allowed to repatriate an amount up to USD one million, per financial year (April-March), out of the balances held in the Non-Resident (Ordinary) Rupee (NRO) account, subject to compliance with applicable tax requirements. This amount includes sale proceeds of assets acquired by way of inheritance or settlement.

6. The FAQs cover the following topics :

A. Acquisition of Immovable Property in India by a person resident outside India, i.e., by a NRI / PIO / foreign national of non-Indian origin by way of purchase / gift / inheritance.

B. Transfer of immovable property in India by a person resident outside India by way of
i) sale
ii) gift
iii) mortgage

C. Mode of payment for purchase of immovable property in India.
D. Repatriation of sale proceeds of residential / commercial property, in India, outside India acquired by NRI / PIO by way of

i) purchased
ii) gift
iii) inheritance

E. Provisions for Foreign Embassies / Diplomats / Consulates General
F. Other Aspects.

A. Acquisition of Immovable Property in India through purchase / gift/ inheritance

Q.1. Who can purchase immovable property in India?
Ans. Under the general permission available, the following categories can purchase immovable property in India:
i) Non-Resident Indian (NRI)1
ii) Person of Indian Origin (PIO)2
The general permission, however, covers only purchase of residential and commercial property and is not available for purchase of agricultural land /plantation property / farm house in India.

Q.2. Can NRI/PIO acquire agricultural land/ plantation property / farm house in India?
Ans. No.

Q.3. Are any documents required to be filed with the Reserve Bank after the purchase?
Ans. No. An NRI / PIO who has purchased residential / commercial property under general permission, is not required to file any documents/reports with the Reserve Bank.

Q.4. How many residential / commercial properties can NRI / PIO purchase under the general permission?
Ans. There are no restrictions on the number of residential / commercial properties that can be purchased.

Q.5. Can a foreign national of non-Indian origin be a second holder to immovable property purchased by NRI / PIO?
Ans. No.

Q.6. Can a foreign national of non-Indian origin resident outside India purchase immovable property in India?
Ans. No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in India. However, he / she can acquire or transfer immovable property in India, on lease, not exceeding five years. In such cases, there is no requirement of taking any permission of /or reporting to the Reserve Bank.

Q.7. Can a foreign national who is a person resident in India purchase immovable property in India?
Ans. Yes, a foreign national who is a 'person resident in India' within the meaning of Section 2(v) of FEMA, 1999 can purchase immovable property in India, but the person concerned would have to obtain the approvals and fulfill the requirements, if any, prescribed by other authorities, such as, the State Government concerned, etc. The onus to prove his/her residential status is on the individual as per the extant FEMA provisions, if required by any authority.
However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of the Reserve Bank.

Q.8. Can the branch / liaison office of a foreign company purchase immovable property in India?
Ans. A foreign company which has established a Branch Office or other place of business in India, in accordance with the Foreign Exchange Management (Establishment in India of Branch or Office or other Place of Business) Regulations, 2000, can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. The payment for acquiring such a property should be made by way of foreign inward remittance through the proper banking channels. A declaration in form IPI should be filed with the Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorised Dealer as a security for the purpose of borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of the Reserve Bank. Further, acquisition of immovable property by entities incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan and who have set up Branch Offices in India and would require prior approval of the Reserve Bank.
However, if the foreign company has established a Liaison Office in India, it cannot acquire immovable property. In such cases, Liaison Offices can acquire property by way of lease not exceeding 5 years.

Q.9. Can a NRI/PIO acquire immovable property in India by way of gift? Can a foreign national acquire immovable property in India by way of gift?
Ans. (a) Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from
i) a person resident in India; or
ii) an NRI; or
iii) a PIO.
However, the property can only be commercial or residential in nature. Agricultural land / plantation property / farm house in India cannot be acquired by way of gift.
(b) A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of gift.

Q.10. Can a non-resident inherit immovable property in India?
Ans. Yes, a person resident outside India i.e. i) an NRI; ii) a PIO; and iii) a foreign national of non-Indian origin can inherit and hold immovable property in India from a person who was resident in India.
However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan should seek prior approval of the Reserve Bank for inheriting immovable property in India.

Q.11. From whom can a non-resident person inherit immovable property?
Ans. A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from
(a) a person resident in India
(b) a person resident outside India
However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange law in force or FEMA regulations, applicable at the time of acquisition of the property.
B. Transfer of immovable property in India
(i) Transfer by way of sale

Q.12. Can an NRI/ PIO/foreign national sell his residential / commercial property?
Ans. (a) NRI can sell property in India to
i) a person resident in India; or
ii) an NRI; or
iii) a PIO.
(b) PIO can sell property in India to
i) a person resident in India; or
ii) an NRI; or
iii) a PIO – with the prior approval of the Reserve Bank
(c) Foreign national of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of the Reserve Bank to
i) a person resident in India
ii) an NRI
iii) a PIO

Q.13. Can a non-resident owning / holding an agricultural land / a plantation property / a farm house in India sell the said property?
Ans. (a) NRI / PIO may sell agricultural land /plantation property/farm house to a person resident in India who is a citizen of India.
(b) Foreign national of non-Indian origin resident outside India would need prior approval of the Reserve Bank to sell agricultural land/plantation property/ farm house in India.
(ii) Transfer by way of gift

Q.14. Can a non-resident gift his residential / commercial property?
Ans. Yes.
(a) NRI / PIO may gift residential / commercial property to
(i) person resident in India or
(ii) an NRI or
(iii) PIO.
(b) A foreign national of non-Indian origin requires the prior approval of the Reserve Bank for gifting the residential / commercial property.

Q.15. Can an NRI / PIO / foreign national holding an agricultural land / a plantation property / a farm house in India, gift the same?
Ans. (a) NRI / PIO can gift an agricultural land / a plantation property / a farm house in India only to a person resident in India who is a citizen of India.
(b) A foreign national of non-Indian origin would require the prior approval of the Reserve Bank to gift an agricultural land / a plantation property / a farm house in India.
(iii) Transfer through mortgage

Q.16. Can residential / commercial property be mortgaged by NRI/ PIO?
Ans. i) NRI / PIO can mortgage a residential / commercial property to:
(a) an Authorised Dealer / the housing finance institution in India without the approval of Reserve Bank
(b) a bank abroad, with the prior approval of the Reserve Bank.
ii) A foreign national of non-Indian origin can mortgage a residential / commercial property only with prior approval of the Reserve Bank.
iii) A foreign company which has established a Branch Office or other place of business in accordance with FERA/FEMA regulations has general permission to mortgage the property with an Authorised Dealer in India.
C. Mode of payment for purchase of immovable property in India.

Q.17. How can an NRI / PIO make payment for purchase of residential / commercial property in India?
Ans. Payment can be made by NRI / PIO out of:
(a) funds remitted to India through normal banking channels or
(b) funds held in NRE / FCNR (B) / NRO account maintained in India No payment can be made either by traveller's cheque or by foreign currency notes or by other mode except those specifically mentioned above.

Q.18 Is repatriation of application money for booking of flat / payment made to the builder by NRI/ PIO allowed when the flat or plot is not allotted or the booking / contract is cancelled?
Ans. The Authorised Dealers can allow NRIs / PIOs to credit refund of application/ earnest money/ purchase consideration made by the house building agencies/ seller on account of non-allotment of flat/ plot/ cancellation of bookings/ deals for purchase of residential, commercial property, together with interest, if any, net of income tax payable thereon, to NRE/FCNR account, provided, the original payment was made out of NRE/FCNR account of the account holder or remittance from outside India through normal banking channels and the Authorised Dealer is satisfied about the genuineness of the transaction.

Q.19. Can NRI / PIO avail of loan from an authorised dealer for acquiring flat / house in India for his own residential use against the security of funds held in his NRE Fixed Deposit account / FCNR (B) account? How the loan can be repaid?
Ans. Yes, such loans are permitted subject to the terms and conditions laid down in Schedules 1 and 2 to the Notification No. FEMA 5/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Deposit) Regulations, 2000, as amended from time to time. Banks cannot grant fresh loans or renew existing loans in excess of Rs. 100 lakhs against NRE and FCNR (B) deposits, either to the depositors or to third parties. The banks should also not undertake artificial slicing of the loan amount to circumvent the ceiling of Rs. 100 lakh.
Such loans can be repaid in the following manner :
(a) by way of inward remittance through normal banking channel or
(b) by debit to the NRE / FCNR (B) / NRO account of the NRI/ PIO or
(c) out of rental income from such property
(d) by the borrower's close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower's loan account.

Q.20. Can NRI / PIO, avail of housing loan in Rupees from an Authorised Dealer or a Housing Finance Institution in India approved by the National Housing Bank for purchase of residential accommodation or for the purpose of repairs / renovation / improvement of residential accommodation ? How can such loan be repaid?
Ans. Yes, NRI/PIO can avail of housing loan in Rupees from an Authorised Dealer or a Housing Finance Institution subject to certain terms and conditions laid down in Regulation 8 of Notification No. FEMA 4/2000-RB dated May 3, 2000 viz. Foreign Exchange Management (Borrowing and lending in rupees) Regulations, 2000, as amended from time to time. Authorised Dealers/ Housing Finance Institutions can also lend to the NRIs/ PIOs for the purpose of repairs/renovation/ improvement of residential accommodation owned by them in India. Such a loan can be repaid
(a) by way of inward remittance through normal banking channel or
(b) by debit to the NRE / FCNR (B) / NRO account of the NRI / PIO or
(c) out of rental income from such property; or (d) by the borrower's close relatives, as defined in section 6 of the Companies Act, 1956, through their account in India by crediting the borrower's loan account.

Q.21. Can NRI/PIO avail of housing loan in Rupees from his employer in India?
Ans. Yes, subject to certain terms and conditions given in Regulation 8A of Notification No. FEMA 4/2000-RB dated May 3, 2000 and A.P. (DIR Series) Circular No.27 dated October 10, 2003, i.e.,
(i) The loan shall be granted only for personal purposes including purchase of housing property in India;
(ii) The loan shall be granted in accordance with the lender's Staff Welfare Scheme/Staff Housing Loan Scheme and subject to other terms and conditions applicable to its staff resident in India;
(iii) The lender shall ensure that the loan amount is not used for the purposes specified in sub-clauses (i) to (iv) of clause (1) and in clause (2) of Regulation 6 of Notification No.FEMA.4/2000-RB dated May 3, 2000.
(iv) The lender shall credit the loan amount to the borrower's NRO account in India or shall ensure credit to such account by specific indication on the payment instrument;
(v) The loan agreement shall specify that the repayment of loan shall be by way of remittance from outside India or by debit to NRE/NRO/FCNR Account of the borrower and the lender shall not accept repayment by any other means.
D. Repatriation of sale proceeds of residential / commercial property purchased by NRI / PIO

Q.22. Can NRI / PIO repatriate outside India the sale proceeds of immovable property held in India?
Ans. (a) In the event of sale of immovable property other than agricultural land / farm house / plantation property in India by a NRI / PIO, the Authorised Dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:
(i) the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations;
(ii) the amount to be repatriated does not exceed: the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels, or the amount paid out of funds held in Foreign Currency Non-Resident Account, or the foreign currency equivalent (as on the date of payment) of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property; and
(iii) in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties. For this purpose, repatriation outside India means the buying or drawing of foreign exchange from an authorised dealer in India and remitting it outside India through normal banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorised dealer from which it can be converted in foreign currency.
(b) in case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India (as defined in Section 6 of the Companies Act, 1956), the amount can be credited to the NRO account of the NRI/PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account.
NRI/PIO are also allowed by the Authorised Dealers to repatriate an amount up to USD 1 million per financial year out of the balance in the NRO account / sale proceeds of assets by way of purchase / the assets in India acquired by him by way of inheritance / legacy. This is subject to production of documentary evidence in support of acquisition, inheritance or legacy of assets by the remitter, and a tax clearance / no objection certificate from the Income Tax Authority for the remittance. Remittances exceeding US $ 1,000,000 (US Dollar One million only) in any financial year requires prior permission of the Reserve Bank.
(c) A person referred to in sub-section (5) of Section 6 of the Foreign Exchange Management Act3 , or his successor shall not, except with the prior permission of the Reserve Bank, repatriate outside India the sale proceeds of any immovable property referred to in that sub-section.

Q.23. Can an NRI/PIO repatriate the proceeds in case the sale proceeds were deposited in the NRO account?
Ans. Please refer to the answer at Q.22 above. NRI/PIO may repatriate up to USD one million per financial year (April-March) from their NRO account which would also include the sale proceeds of immovable property. There is no lock in period for sale of immovable property and repatriation of sale proceeds outside India.

Q.24. If a Rupee loan was taken by the NRI/ PIO from an Authorised Dealer or a Housing Finance Institution for purchase of residential property can the NRI / PIO repatriate the sale proceeds of such property?
Ans. Yes, Authorised Dealers have been authorised to allow repatriation of sale proceeds of residential accommodation purchased by NRIs/ PIOs out of funds raised by them by way of loans from the authorised dealers/ housing finance institutions to the extent such loan/s repaid by them are out of the foreign inward remittances received through normal banking channel or by debit to their NRE/FCNR accounts. The balance amount, if any, can be credited to their NRO account and the NRI/PIO may repatriate up to USD one million per financial year (April-March) subject to payment of applicable taxes from their NRO account balances which would also include the sale proceeds of the immovable property.

Q.25. If the immovable property was acquired by way of gift by the NRI/PIO, can he repatriate abroad the funds from sale of such property?
Ans. The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only. From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.

Q.26. If the immovable property was received as inheritance by the NRI/PIO can he repatriate the sale proceeds?
Ans. Yes, general permission is available to the NRIs/PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India subject to the following conditions:
(i) The amount should not exceed USD one million, per financial year
(ii) This is subject to production of documentary evidence in support of acquisition / inheritance of assets and an undertaking by the remitter and certificate by a Chartered Accountant in the formats prescribed by the Central Board of Direct Taxes vide their Circular No.4/2009 dated June 29, 2009
(iii) In cases of deed of settlement made by either of his parents or a close relative (as defined in section 6 of the Companies Act, 1956) and the settlement taking effect on the death of the settler
(iv) the original deed of settlement and a tax clearance / No Objection Certificate from the Income-Tax Authority should be produced for the remittance
(v) Where the remittance as above is made in more than one installment, the remittance of all such installments shall be made through the same Authorised Dealer
(vi) In case of a foreign national, sale proceeds can be repatriated if the property is inherited from a person resident outside India with the prior approval of the Reserve Bank. The foreign national has to approach the Reserve Bank with documentary evidence in support of inheritance of the immovable property and the undertaking and the C.A. Certificate mentioned above. The general permission for repatriation of sale proceeds of immovable property is not available to a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan and Iran and he has to seek specific approval of the Reserve Bank.
As FEMA, 1999 specifically permits transactions only in Indian Rupees with citizens of Nepal and Bhutan. Therefore, the question of repatriation of the sale proceeds in foreign exchange to Nepal and Bhutan would not arise.
E. Provisions for Foreign Embassies / Diplomats / Consulates General

Q.27. Can Foreign Embassies / Diplomats / Consulates General purchase / sell immovable property in India?
Ans. In terms of Regulation 5A of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2000, Foreign Embassies/ Diplomats/ Consulates General, may purchase/ sell immovable property (other than agricultural land/ plantation property/ farm house) in India provided –
(i) Clearance from the Government of India, Ministry of External Affairs has been obtained for such purchase/sale; and
(ii) The consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through the normal banking channels.
F. Other Aspects

Q.28. Can NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds?
Ans. Yes, NRI/PIO can rent out the property without the approval of the Reserve Bank. The 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, dividend, pension, interest, etc. of NRIs/PIO who do not maintain an NRO account in India based on an appropriate certification by a Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/provided for.

Q.29. Can a person who had bought immovable property, when he was a resident, continue to hold such property even after becoming an NRI/PIO?
Ans. Yes, a person who had bought the residential / commercial property / agricultural land/ plantation property / farm house in India when he was a resident, continue to hold the immovable property without the approval of the Reserve Bank even after becoming an NRI/PIO.

Q. 30. In which account can the sale proceeds of such immovable property be credited ?
Ans. The sale proceeds may be credited to NRO account of the NRI /PIO.

Q.31. Can the sale proceeds of the immovable property referred to in Q.No. 29 be remitted abroad ?
Ans. Yes, From the balance in the NRO account, NRI/PIO may remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.

Q.32. Can foreign nationals of non-Indian origin resident in India or outside India who had earlier acquired immovable property under FERA with specific approval of the Reserve Bank continue to hold the same? Can they transfer such property?
Ans. Yes, they may continue to hold the immovable property under holding license obtained from the Reserve Bank. However, they can transfer the property only with the prior approval of the Reserve Bank.

Q.33. Is a resident in India governed by the provisions of the Foreign Exchange Management (Acquisition and transfer of immovable property in India) Regulations, 2000?
Ans. A person resident in India who is a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan is governed by the provisions of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000, as amended from time to time, i.e. she/he would require prior approval of the Reserve Bank for acquisition and transfer of immovable property in India even though she/he is resident in India. Such requests are considered by the Reserve Bank in consultation with the Government in India.
The citizens of countries other than those listed above can be PIOs who are covered under the general permission (please refer to Q.No.1). The provisions relating to foreign national of non-Indian origin are covered in detail in Q Nos. 6 and 7.
Note: The relevant regulations covering the transactions in immovable property have been notified vide RBI Notification No. FEMA 21/2000-RB dated May 3, 2000 and this basic notification has been subsequently amended by the notifications detailed below:
i) Notification No.FEMA 64/2002-RB dated June 29, 2002;
ii) Notification No.FEMA 65/2002-RB dated June 29, 2002;
iii) Notification No.FEMA 93/2003-RB dated June 9, 2003;
iv) Notification No. FEMA 146/2006-RB dated February 10, 2006 read with A.P.(DIR Series) Circular No. 5 dated 16.8.2006; and
v) Notification No. FEMA 200/2009-RB dated October 5, 2009
All the above notifications and A.P. (DIR Series) Circulars are available on the RBI website: www.fema.rbi.org.in. The Master Circular on Acquisition and Transfer of Immovable Property in India by NRIs/PIOs/Foreign Nationals of Non-Indian Origin is also available on the website under the link "www.rbi.org.in à Sitemap à Master Circulars".
Most NRIs give a lot of thinking before investing in property in India and most of the time put off the plan due to effort, research and planning involved and in some instances if they do not have enough funds for the same. For such individuals there is always the NRI home loan.
RBI defines NRI as "An Indian citizen who holds a valid Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a NRI."
Purpose of the NRI Home Loan
The NRI loans are made available for the following purposes:
• Self-construction of a property on a plot of land
• Finance the purchase of a plot of land allotted by a society/development authority
• Renovate/improve an existing property in India
• Purchase of a house either under construction or on a resale Non-resident Indians are also permitted to purchase an existing house or flat. The RBI has not prohibited banks from providing financing to NRIs for the purchase of a second house, but the loan on the house is for the self-occupation of the NRI upon their return to India. Loans are also offered toNRIs against NRE deposits. These loans can be repaid out of NRE funds but the interest would be charged at a commercial rate. Loans to Non-Resident Indians are also provided against FCNR deposits.

Difference between a normal & NRI Loan
NRI home loans can be availed by any NRI with as much ease and convince as any resident would avail a home loan. However some difference between the two kinds of loans exists in terms of tenure, documents, repayment etc. Interest rate is little costlier for NRI than Indian residents, it is 0.25% to 0.50% more for NRIs. The NRI gets the only 85% cost of the property as a loan amount. The tenure of loan is also short ranging from 7 years to 15 years. The size of the loan depends upon the borrower's repayment capacity. Up to 36 times of the gross monthly earnings of the applicant may be issued as loan. However, there is a maximum limit. Calculation of eligibility is same as that of Indians living in the country.
The re-payment can be made as equated monthly Installments (EMI) through Non - Resident Ordinary (NRO) account or the Non Resident External (NRE) Account.
For security, most banks insist that the first mortgage of the property should be in their name. If the property is under construction then adequate additional security is required such as guarantee of third party (either resident or non-resident).

Tax benefits
NRIs cannot claim tax benefits on home loans in India as they have to pay tax in the nation where they work and earn. However, they need to file tax returns to become eligible for home loans. However, if they pay tax in India for income earned in India, they can claim tax rebate for the home loan.

The current scenario
An estimated 25 million NRIs living in 130 countries have remitted US$52 billion so far this year (December 2009). In fact India topped the list of countries in remittance flow followed by China and Mexico, according to World Bank report on Migration and Development Brief.
The impact of global slowdown, job losses and unviable job offers has necessitated a section of NRIs to return to Indian shores.
According to housing finance companies and banks disbursing home loans to NRIs/PIOs in Dubai, there has been a sudden surge in demand for residential property across Indian cities and particularly for Tier II cities in the wake of the economic slowdown in the emirate. Southern cities in particular Bangalore, Chennai and Hyderabad are driving the demand though minimal level demand exists for other cities as well. Most of the NRIs keen to invest in real estate back home are looking for home loans as they are unable to get loans locally due to the current tight liquidity situation across US.

What experts say?
Experts agree that despite turbulence in mature markets, the "emotional appeal" of buying a property in India may be stronger now. However, this in turn has created a price increase in the last six months. Popular property portals claim that the number of queries from NRIs has surged nearly 15-20 per cent over the last two-three months. However, just how many of these 'queries' translate into actual sales remains to be seen, say people behind the business. The focus on NRIs for these portals is stronger now as many are looking to come back to India apart from those who wish to invest in properties.
Another factor that seems to favour NRIS is the FDI Policy that permits FDI up to 100% from foreign/NRI investor under the automatic route has boosted NRI confidence. Banks have attractive NRI housing schemes to accommodate the housing needs of NRIs. From the stables of HFCs, NRI housing finance plans with suitable repayment options are available. The easy interest rates on housing finance and the improved lifestyle that developers have created has enabled NRIs to acquire property not only for investment, but also for personal use.

Access to NRI loans - at the door step
The response to the real estate market has been so encouraging from the overseas community that it has prompted housing finance companies (HFCs) to set up branches in countries where there is a high NRI concentration, as in the case of ICICI Bank. The bank has representative offices in Dubai, New York, Bahrain, Singapore and the UK to tap potential property investors there.
ICICI Bank, Sundaram Home Finance Limited, LIC Housing Finance, HDFC, CanFin Homes, Citibank and a host of other scheduled banks are vying for lending opportunities to NRIs. However the final decision on whether the time is right to buy a house, whether to use one's own funds or to take a loan, whether to go for an independent house or an apartment, and which home loan provider to use must be made by the NRI himself/herself after careful analysis.

What this means for the realty market
Builders are looking to make up for the huge losses in the past year or so. With growing NRI interest in Indian properties, reports suggest that the realty prices have rebounded to 2007-2008 levels, which however cannot be good news for people scouting for homes with toned down prices. This is again an example of how a reaction in one corner of the globe can affect another. Sometime back the same scenario happened with rentals, which shot up with a lot of NRIs returning home to take up jobs in India.