One of my friends had migrated to Australia 10 years back, after having disposed off his residential property in Mumbai then. Few days ago I received a call from him and he sounded somewhat hassled. On slight coaxing he revealed that he wanted to buy a residential property in India as he was planning to return for the good. He wanted to know how he can proceed in the matter, as he knew property buying is quite a task even for resident Indians, forget NRIs. He told me that he still retains the Indian Passport so for all practical purposes he was an NRI. This made for an interesting topic to study, to help not only my friend but many such NRIs.
This led me to the study of the law applicable to NRIs and other manoeuvrings in the procedure for these people (read NRIs) who want to buy a property in India.
Here it goes:
Though with FEMA the foreign exchange laws have been modified and diluted significantly but due to the legacy of FERA excesses during old days, NRI people are very apprehensive while dealing in with any immovable properties in India. Since the matter of purchase of immovable property in India by NRIs is covered under the provisions of FEMA, it is advisable to understand the legal position. In this article I would try to cover the prevalent provisions in respect of purchase of immovable property by NRIs in India.
RBI has issued a notification granting a general permission to NRIs for purchase of certain immovable properties in India without obtaining any specific permission from RBI. So Indian Citizens who have become NRIs, for FEMA purposes can acquire certain immovable property situated in India without any specific permission from RBI.
Types of properties where NRI or POI can invest:
Though RBI has given general permission to the NRIs to purchase immovable properties in India, the permission does not grant power to acquire any and every property in India. The NRIs are allowed to purchase only residential or commercial property. So NRIs cannot purchase any agricultural land or plantation property. Since it is fashionable to own a farmhouse, let me make it very clear that under the existing dispensations, NRIs cannot purchase a farmhouse in India. This way as long as the investment being made by NRIs in India is either in residential property or commercial property, they are not even required to intimate RBI about such purchases, even post conclusion of the transaction. Moreover there is no restriction as to the number of residential or commercial property an NRI can acquire.
Source for financing the purchase of immovable property in India:
The payment for purchase of permitted property by an NRI can be made by way of remittance through banking channels from abroad or from money lying in their NRE/NRO or FCNR account. The money for purchase of the permitted properties has to come only through banking channels hence the payment cannot be tendered in the form of traveler’s cheques or foreign currency.
NRIs are even allowed to finance the purchase with home loan in Indian Rupees. The home loan can be granted by the Indian employer of the NRI employee for the purpose of financing of the property.
Servicing of the home loan:
As far as payments of EMI for the home loan taken in Indian Currency in India is concerned, the same can be done either by direct remittance from abroad or from the money lying to the credit in NRE/NRO/FCNR account of the NRI. In addition to the above sources, the home loan can even be serviced out of the rents received from such property or money transferred to borrowers account from the account of relatives of such borrower.
In case the NRI is buying the property for the purpose of his own residence, the NRI can even take loan against deposits lying in their FCNR or NRE account upto an amount of Rs. 100 lacs for the purpose of servicing the home loan.
Who can be named as joint owner of the properties?
The property to be purchased by an NRI can either be purchased in single name or jointly with any other NRI. It may be noted that that a resident Indian or a person who is otherwise not allowed to invest in the property in India cannot even be made a joint owner in such property though the second named person might not even be contributing any money towards the property.
Continuance of ownership of properties after becoming NRI:
Lot of people who are taking up jobs outside India and thus would become NRIs are worried about what would happen to the properties, which they already own. There is nothing to worry about for such properties. A person who owns a property when he becomes an NRI can continue to hold the property in his name. It is interesting to note here that such resident Indian becoming an NRI is even allowed to continue to own agricultural land, plantation property or farm house which he is otherwise not allowed to purchase after becoming NRI. An NRI is allowed to let out the property, which he owned when he became an NRI without taking any permission from RBI. An NRI is even allowed to get the money sent back outside India after appropriate taxes have been paid in India from rent so received.
So from the above discussion it becomes clear that buying a house or office in India by the NRIs is not very difficult as long as you are either able to pay for it or get a home loan.
Like you, I am keeping my friend also posted. Hope you along with him are also benefited.
Author can be reached at https://www.facebook.com/rishobkumar.agnibashya