Any non-resident Indian (NRI) interested in buying a property in India should be aware of certain legal provisions relating to the purchase or ownership of immovable property in India under the Foreign Exchange Management Act (FEMA). NRIs and persons of Indian origin (PIOs) are treated equally for real estate investment.
Types of properties where NRIs or PIOs can invest
Reserve Bank of India (RBI) has issued a circular letter giving NRIs general permission to acquire residential or commercial property in India. The investor does not need to obtain any special permission from RBI, nor is he required to send any communication or intimation to RBI in this regard. Under the existing general permissions, an NRI can purchase any number of residential or commercial properties. The income tax laws also allow an NRI to own as many residential or commercial properties as he/she pleases.
If the NRI is unable to come to India, the documents relating to the purchase may be executed by any person who has a valid power of attorney.
Under the RBI’s general permission, an NRI cannot acquire agricultural land or plantation property in India. As a result, NRIs cannot buy farmhouses in India under current regulations. So, if an NRI wants to buy a farmhouse or plantation, he/she needs to contact RBI for a specific permit, and RBI will consider this on a case-to-case basis.
An NRI can purchase the property either individually or jointly with any other NRI. However, a resident Indian or a person who is otherwise not allowed to invest in a property in India cannot become a joint holder in such property, regardless of the second owner’s contribution towards the purchase.
Continuation of ownership of property after becoming an NRI
What happens if a person who owns properties in India, subsequently, becomes an NRI? Such a person may continue to hold the property in his name in India. An NRI is entitled to own agricultural land, farms or plantations that it possessed when he/she became an NRI, which he/she is otherwise not be permitted to buy after becoming an NRI. They are also authorized to let out the property regardless of the time of purchase. The rent received from such property can be remitted after proper Indian taxes have been paid on such rent.
Likewise, any NRI is permitted to sell, or gift an immovable property to any person resident in India. He/she can also gift or transfer any property, other than agricultural, farmhouse or plantation property, to an NRI.