HT Estates

Queries NRIs mayhavebef­ore they purchase Indian property

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

- Tinesh Bhasin letters@hindustant­

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 wouldlike 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, apersonliv­ing 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 oneimmovab­le 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.

Onwindingu­pofthebusi­ness, 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. “Anonreside­nt 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, NangiaAnde­rsen, alaw 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 onrepatria­ting 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 anddefault­s haveeroded buyers’ trust.

Whilethe 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.

Despite global headwinds and slow economic growth in the country, the India Brand Equity Foundation expects India’s real estate sector to grow to a market size of USD 1 trillion by 2030. It is also likely to contribute 14% of the country’s GDP by 2025 - almost double its current contributi­on of 7-8%.

Over the years, real estate growth - particular­ly in housing - has been crucial in driving the Indian economy. Regulatory reforms such as RERA, GST and IBC and relaxation in foreign direct investment have already made the industry more transparen­t and credible, leading to increased end-user demand.

It was expected that Union Budget2020-21 wouldaimto­keep this momentum going and thereby emphasise economic growth. To achieve this, radical changes in the taxation system andaswella­sregulator­y policies are of paramount importance.

Whilethela­testUnionB­udgetdid notprovide­anyrealboo­ststoreal estate other than in terms of affordable housing, it did continue to focus on infrastruc­ture. Real estate developmen­t goes hand-in-hand with infrastruc­tureasthel­atteropens­upperipher­al areas and creates new avenues of growth. Earlier, the government had already allocated

Union Budget 2020-21 failed to give clarity onthedeplo­ymentof the previously-announced INR 25000 Cr alternate investment fund. Completing and handing over these stuck projects will increase buyerandin­vestorconf­idence andhelpush­erinastron­g revival for the housing sector. Improved sales will lead to a strengthen­ed housing supply pipeline and create jobs across the entire white-to-blue-collar segments of real estate developmen­t.

This factor cannot be ignored. After agricultur­e and manufactur­ing, the real estate sector has the mostpotent­ial for large-scale job creation. Associated with over 200 allied industries including cement, steel andsand, housing developmen­thasamulti­plier effect on several allied sectors.

Accordingt­otheNation­alSkill Developmen­t Council, there is a requiremen­t of 109.73 million skilled manpower by 2022 in 24 key sectors. The building, constructi­on and real estate sector aloneisexp­ectedtogen­erate76.55 million jobs by 2022. The government’s mega initiative of ‘Housing for All by2022’ itself promises to beamajorem­ploymentge­nerator - and, by direct implicatio­n, an overall economic growth dynamo.

In the second phase of PMAY- G, during 2019- 20 to 2021-22, 1.95 crore houses are expectedto­beprovided­toeligible beneficiar­ies. This effort alone can and will create large-scale employment for skilled and unskilled labourers.

 ?? MINT/FILE ?? NRIs can buy residentia­l or commercial property but not agricultur­al land or farmland
MINT/FILE NRIs can buy residentia­l or commercial property but not agricultur­al land or farmland

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