Key things NRIs should keep in mind while buying property in India
At one point in time, buying real estate property in India used to be a tedious job. With specific legal reform over the years, it is now a seamless process. According to the Foreign Exchange Management Act (FEMA) – a Non-Residential Indian (NRI) is a resident outside of India for more than 182 days. The Reserve Bank of India (RBI) governs transactions like buying real estate properties for NRIs in India, and they fall under the purview of the 1999 FEMA.
After a thorough review of the reasons, on a case-to-case basis, RBI now permits NRIs to purchase agricultural land, plantation land, or a farmhouse. But there is no restriction for an NRI to purchase a residential or commercial property.
Acquisition and Inheritance
* The acquisition of immovable property in India by way of gift from a resident of India, another NRI, or from an Overseas Citizen of India (OCI), who is a relative as defined under the Companies Act, 2013, is possible.
* An NRI can inherit immovable property in India from a person resident outside India (who acquired it as per the provisions of the foreign exchange law), or from a person resident in India.
* A person resident outside India, not being an NRI or an OCI, may acquire one immovable property (other than agricultural land/ farmhouse/ plantation property), jointly with his/ her NRI spouse, provided that the consideration for transfer shall be made from:
a. funds received in India through banking channels by way of inward remittance from any place outside India or
b. funds held in any non-resident account maintained in accordance with the provisions of the FEMA and the regulations made by RBI.
* No payment for any transfer of immovable property shall be made either by traveler’s cheque, foreign currency notes or by a mode other than those specifically permitted under this clause provided that:
a. marriage has been registered for a minimum of two years immediately preceding the acquisition of such property, and
b. further that the non-resident spouse is not otherwise prohibited from such acquisition.
Modes of transaction
* To acquire immovable property in India, the transaction should be carried out in Indian currency through an NRI account in an authorized Indian Bank. Mandatorily, the NRI should have a Non-Resident Ordinary Account (NRO), Non-Resident External (NRE) or Foreign Currency Non-Resident account (FCNR).
* The RBI allows NRIs to take home loans for buying property in India. The EMIs can be paid in any one of the following ways:
a. By remitting the money from your foreign bank account through regular banking channels.
b. By issuing post-dated cheques or Electronic Clearance Service (ECS) from your NRE, NRO or FCNR Account; and out of the rental income.
Power of Attorney
To undertake immovable property-related transactions in many states of India, a registered version of Power of Attorney (PoA) is mandatory. PoA is a legal document through which an NRI can authorize another person on behalf of themselves, to attend the registration/ execution of the documents related to the purchase/sale of a property.
It is recommended to give a Special or Specific Power of Attorney to an adult Indian National so that he/she is authorized to complete intended formalities as per the desire of NRI, when they are not present.
Properties under construction
A property under construction should ideally be part of a project registered with the Real Estate Regulatory Authority, to be considered for the transaction. Further, ensuring that these projects are pre-approved by the National Banks for loans, will mean that the required due diligence about the project and construction company is already carried out.
To conclude, for any kind of transaction, an NRI should investigate the fact that the title of a property is clean and duly verified with the help of a real estate attorney and title investigator. By following due protocol, the acquisition/inheritance of a real estate property in India can be a smooth process.
(By Rahul Hingmire, Founding Partner at Vis Legis Law Practice, Advocates)
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