NRIs can purchase immovable property in India, except for agricultural land, plantation property, and farmhouses. They can pay for the property using funds from inward remittances, debiting their NRE, FCNR(B), or NRO accounts, but not with traveler’s checks or foreign currency notes. NRIs can also acquire immovable property through gifts from Indian residents, NRIs, or OCIs who are relatives as defined in the Companies Act, 2013. However, foreign nationals who are not Indian and live outside India cannot acquire property through gifts.
He can transfer any immovable property other than agricultural or plantation property or farmhouse to:
a) A person resident outside India who is a citizen of India or
b) A person of Indian origin resident outside India or
c) A person resident in India.
He/she may transfer agricultural land/ plantation property/farmhouse acquired by way of inheritance, only to Indian citizens permanently residing in India.
RBI in a notification said that a large number of queries have been received at various offices of the Reserve Bank, based on newspaper reports on a Supreme Court Judgement, on whether prior approval of RBI is required for the acquisition/transfer of immovable property in India by as Overseas Citizen of India OCIs.
In this regard, the Central Bank clarified that the concerned Supreme Court Judgement dated February 26, 2021, in Civil Appeal 9546 of 2010 was related to provisions of FERA, 1973, which has been repealed under Section 49 of FEMA, 1999. RBI further said that “At present, NRIs/OCIs are governed by provisions of FEMA 1999 and do not require prior approval of RBI for acquisition and transfer of immovable property in India, other than agricultural land/ farmhouse/ plantation property, as per the terms and conditions laid down in Chapter IX of the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, dated October 17, 2019 (as amended from time to time), issued under Section 46 of FEMA 1999” RBI said.
The Supreme Court (SC) on 21st February 2021 delivered a judgment declaring that the sale or gift of property by a foreigner without the permission of RBI is illegal. In this case, the court was dealing with a suit relating to a property gifted by Mrs. F.L. Raitt, widow of Mr. Charles Raitt, who is a foreigner to Vikram Malhotra, without obtaining the permission of the Reserve Bank of India (RBI). The Supreme Court Bench inferred that the sale or gift of property by a foreigner without the permission of RBI was in contravention of Section 31 of the Foreign Exchange Regulation Act, 1973 (FERA, 1973). As per the 1973 act, any person who is not a citizen of India or any company that is not incorporated in the country is required to get permission from RBI to acquire, hold, transfer, or dispose of immovable property in the country.
RBI has made amendments to FEMA regulations in 2018, according to which similar provisions applicable to NRIs are also valid for OCI (Overseas Citizens of India) in respect of acquiring and transferring property in India. Earlier, there were separate guidelines for People of Indian Origin (PIO).
Purchase/ Sale of Immovable Property by Foreign Embassies / Diplomats / Consulate General
Foreign Embassy / Consulate as well as Diplomatic personnel in India are allowed to purchase/sell immovable property in India other than agricultural land/plantation property/farmhouse provided (i) clearance from the Government of India, Ministry of External Affairs is obtained for such purchase/sale, and (ii) the consideration for the acquisition of immovable property in India is paid out of funds remitted from abroad through banking channels.
Acquisition of Immovable Property for carrying on a permitted activity. A branch, office, or other place of business, (excluding a liaison office) in India of a foreign company established with requisite approvals wherever necessary,
is eligible to acquire immovable property in India that is necessary for or incidental to carrying on such activity provided that all applicable laws, rules, regulations or directions in force are duly complied with. The entity/concerned person is required to file a declaration in the form IPI with Reserve Bank, within ninety days from the date of such acquisition. The non-resident is eligible to
transfer by way of mortgage the said immovable property to an AD bank as a security for any borrowing.
Note: Meaning of transfer: As per section 2(ze) of FEMA transfer means, sale, purchase, exchange, mortgage, pledge, gift, loan, or any other form of transfer of right, title, possession, or lien.
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