Queries NRIs may have be­fore they pur­chase In­dian prop­erty

Buy­ing prop­erty in In­dia can be a com­pli­cated af­fair for NRIs who can buy res­i­den­tial or com­mer­cial prop­erty

Hindustan Times (Chandigarh) - Estates - - Front Page - Ti­nesh Bhasin let­[email protected]­dus­tan­times.com ■

NEWDELHI: Non-res­i­dent In­di­ans (NRIs) are of­ten seen as keen on buy­ing a prop­erty in In­dia— whether it’s for fam­ily liv­ing back home or be­cause they want a get­away in In­dia ev­ery time they re­turn, or sim­ply be­cause they would like to come back and set­tle in In­dia later in their lives.

How­ever, buy­ing a prop­erty in In­dia can be a com­pli­cated af­fair for NRIs. Typ­i­cally, they rely on their rel­a­tives to help them abide by mul­ti­ple reg­u­la­tions. If you are an NRI look­ing for a prop­erty in In­dia or some­one who has a non-res­i­dent rel­a­tive re­ly­ing on you to un­der­stand In­dian reg­u­la­tions, we have got answers to the most com­mon ques­tions that can con­fuse you.

Typ­i­cally, a per­son liv­ing abroad would ei­ther con­tinue to have an In­dian pass­port and per­ma­nent res­i­dency of another coun­try or be a for­eign na­tional with the pass­port of another coun­try.

The term NRI is used loosely to de­note a per­son with In­dian roots liv­ing abroad. How­ever, ac­cord­ing to reg­u­la­tions, the term is ap­pli­ca­ble only to cer­tain in­di­vid­u­als. The For­eign Ex­change Man­age­ment Act (FEMA) de­fines those who hold an In­dian pass­port and those who don’t. “There was a con­cept called Peo­ple of In­dian ori­gin (PIO) for a for­eign pass­port holder. There was also an Over­seas Cit­i­zen of In­dia (OCI) card that pro­vides sev­eral travel and in­vest­ment priv­i­leges. In 2015, the gov­ern­ment amended the Cit­i­zen­ship Act and merged PIO with OCI,” said Mukesh Jain, founder, Mukesh Jain and As­so­ciates, a law firm.

The Re­serve Bank of In­dia (RBI) rec­og­nizes NRIs and Over­seas Cit­i­zen of In­dia Card­hold­ers (OCC) to be on the same foot­ing with ef­fect from March 2018.

An­swer: If you have a for­eign pass­port, you can buy prop­erty in In­dia pro­vided you get an OCI card.

NRIs and OCCs are per­mit­ted to ac­quire im­mov­able prop­erty in In­dia other than an agri­cul­tural prop­erty, farm­house or plan­ta­tion. How­ever, the money used for buy­ing prop­erty should be re­ceived by way of in­ward re­mit­tances or held in a non-res­i­dent ac­count. “For­eign na­tion­als who are mar­ried to NRIs or OCCs can ac­quire one im­mov­able prop­erty jointly with their spouse,” said Atul Pandey, part­ner, Khai­tan & Co., a law firm.

But ci­ti­zens of 11 coun­tries— Pak­istan, Bangladesh, Sri Lanka, Afghanista­n, China, Iran, Nepal, Bhutan, Ma­cau, Hong Kong and Demo­cratic Peo­ple’s Repub­lic of Korea (DPRK)—can­not ac­quire or trans­fer im­mov­able prop­erty in In­dia, ir­re­spec­tive of their res­i­den­tial sta­tus, with­out prior per­mis­sion from RBI.

An­swer: Non-res­i­dents can buy res­i­den­tial as well as com­mer­cial real es­tate. They are not per­mit­ted to pur­chase agri­cul­tural land or farm­land.

NRIs or OCCs can in­herit any im­mov­able prop­erty in In­dia. Also, the law per­mits them to in­herit agri­cul­tural land and farm­houses, which they are other­wise not en­ti­tled to pur­chase.

There is also no re­stric­tion on per­sons from whom a non-res­i­dent can in­herit prop­erty. NRIs and OCCs can even in­herit a prop­erty in In­dia from other NRIs or OCCs.

Sim­i­larly, a non-res­i­dent can freely be­queath or gift prop­erty lo­cated in In­dia to res­i­dents, NRIs or OCCs, ex­cept for na­tion­als of the 11 coun­tries men­tioned ear­lier.

NRIs and OCCs can also re­ceive a prop­erty as a gift. “If the prop­erty is from a close rel­a­tive as de­fined in the In­come-tax Act, 1961—mother, father, chil­dren, brother and so on—then there will be no tax im­pli­ca­tion. But if it is not from a close rel­a­tive, it would be tax­able in the hands of the re­ceiver based on ei­ther the sale price or stamp duty value. Tax will be paid on the higher of the two val­ues,” said Suresh Su­rana, founder, RSM As­tute Con­sult­ing Group, a char­tered ac­coun­tancy firm.

An­swer: Non-res­i­dents can in­herit or gift any prop­erty, in­clud­ing agri­cul­tural land or farm­land.

For­eign firms that have an of­fice in In­dia have re­stric­tions on prop­erty pur­chase. A com­pany that has es­tab­lished an of­fice in ac­cor­dance with FEMA can pur­chase real es­tate that is nec­es­sary or in­ci­den­tal to car­ry­ing on its busi­ness.

On wind­ing up of the busi­ness, the sale pro­ceeds of such prop­erty can be repa­tri­ated only with the prior ap­proval of RBI. “But, if a for­eign com­pany has es­tab­lished a li­ai­son of­fice, it can­not ac­quire im­mov­able prop­erty in In­dia. In such cases, the li­ai­son of­fices can only take prop­erty on lease for up to five years,” said Jain.

An­swer: Non-res­i­dents can­not buy real es­tate through com­pa­nies for a per­sonal pur­pose.

There was a time when many non-res­i­dents gave a gen­eral power of at­tor­ney (PoA) to rel­a­tives or prop­erty agents to man­age day-to-day af­fairs.

There have been sev­eral cases where such rel­a­tives or agents sold the prop­erty with­out in­form­ing the own­ers. Now the Supreme Court (SC) has held that their prop­er­ties can­not be trans­ferred based on a gen­eral PoA. In a gen­eral PoA, the owner of the prop­erty (the prin­ci­pal) can au­tho­rize another per­son (the agent or rel­a­tive) to act on his or her be­half.

An­swer: NRIs can use a spe­cific PoA if they want to au­tho­rize a per­son to sell on their be­half. But the PoA must be reg­is­tered in In­dia af­ter the pay­ment of stamp duty.

NRIs or OCCs may need to re­mit ei­ther the rental in­come or the sale pro­ceeds from a prop­erty to the coun­try of res­i­dence. “A non­res­i­dent can re­mit in­come like rent from a non-res­i­dent or­di­nary (NRO) or from a non-res­i­dent ex­ter­nal (NRE) ac­count in In­dia. If the ten­ant is di­rectly re­mit­ting rent to the non-res­i­dent, it would be sub­jected to the lim­its pre­scribed un­der the Lib­er­alised Remit­tance Scheme (LRS), which is a max­i­mum of $250,000 ev­ery fi­nan­cial year,” said Su­rana.

Typ­i­cally, there’s a cap of $1 mil­lion a year on repa­tri­a­tion. In case NRIs or OCCs want to repa­tri­ate the sale pro­ceeds to their coun­try of res­i­dence, they can only do up to the pre­scribed limit. But they can repa­tri­ate a higher amount, af­ter RBI ap­proval, in case prop­erty sold meets the fol­low­ing three cri­te­ria. The first con­di­tion, ac­cord­ing to San­deep Jhun­jhun­wala, di­rec­tor, Nan­gia An­der­sen, a law firm, is that the prop­erty ac­qui­si­tion should com­ply with FEMA reg­u­la­tions. Se­cond, the money for the pur­chase should come from a bank­ing chan­nel and, third, in the case of res­i­den­tial prop­erty, the repa­tri­a­tion of sale pro­ceeds should be re­stricted to two prop­er­ties, said Jhun­jhun­wala. In other cases, say, where the prop­erty sold was in­her­ited, the cap will ap­ply.

An­swer: There’s a $1 mil­lion cap on repa­tri­at­ing sale pro­ceeds of a prop­erty, rent and other in­come. OCC and NRI can re­mit a higher amount to the home coun­try only in some con­di­tions.

In case of dis­putes, NRIs and OCCs can seek re­lief from var­i­ous In­dian courts and fora, just like any res­i­dent In­dian prop­erty owner. Civil dis­putes about the ti­tle of a prop­erty owned by an NRI can be ad­ju­di­cated by In­dian courts. NRIs can even ap­proach real es­tate reg­u­la­tory au­thor­i­ties or con­sumer fora of any state.

An­swer: They can ap­proach any reg­u­la­tor or court to seek re­lief just like an In­dian res­i­dent.

The real es­tate sec­tor has been wit­ness­ing a slow­down for a while now, and cases of de­lays and de­faults have eroded buy­ers’ trust.

While the in­tro­duc­tion of Rera has en­sured that devel­op­ers stick to their prom­ises, some states are yet to im­ple­ment it fully.

Ex­perts said it’s best to stay away from real es­tate in such states. “The risks of non-com­ple­tion or de­lay are mit­i­gated by se­lect­ing good devel­op­ers with proven track records and sound fund­ing. The cost ar­bi­trage that un­der-con­struc­tion homes pro­vide over ready-to-move-in ones is still a com­pelling ra­tio­nale,” said Anuj Puri, chair­man, ANAROCK Prop­erty Con­sul­tants.

Given the on­go­ing slow­down in the real es­tate mar­ket, non­res­i­dents should ide­ally avoid buy­ing res­i­den­tial prop­er­ties as of now.


■ NRIs can buy res­i­den­tial or com­mer­cial prop­erty but not agri­cul­tural land or farm­land

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