NRIs, ownership rights and transfer of property
Foreign Exchange Management Act (FEMA) classifies the people living outside India into three categories: NRI (non-resident Indian), PIO (foreign national of Indian origin) or a foreign national of non-Indian origin. While NRIs and PIOs trace back their roots to India, a foreign national with non-Indian origin may be any foreigner with no connection to India.
The act is designed to welcome investments in property in India by NRIs, PIOs and, in some cases, from the foreign nationals/companies settled or located out of India.
What are the ownership rights of non-residents? According to FEMA and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, the NRIs and PIOs are allowed ownership of immovable property in India, including residential, commercial and industrial land and property, with no limit on the number of properties which can be purchased. However, these regulations do not allow an NRI/PIO to buy any agricultural land/plantation property/farmhouse in India through the automatic route.
Certain exceptions to these ownership rights include NRIs/PIOs seeking special permissions from the RBI to purchase agricultural land, plantation property or/and farmhouse, which may be allowed by the RBI after the consideration of various factors. Additionally, they can simply inherit agricultural land from a resident Indian.
For a foreign national, who is a 'person resident in India', property ownership comes with various approvals and fulfillment of multiple requirements as stated by authorities, including state government and municipal corporations. However, a citizen of neighboring Pakistan, Bangladesh, Afghanistan, Iran, China, Sri Lanka, Nepal and Bhutan require prior approval of RBI for buying a property in India.
Corporate property ownership: In terms of ownership rights of foreign companies, the companies with permission to have branches or project offices in India are allowed to own immovable property, which is required for running operations, in India.
Joint Ownership with Indian Citizen NRIs/PIOs are allowed to buy a property in joint ownership with an Indian citizen, with the co-owner having the right to possession of the property, right to use the property and right to dispose-off the property. Usually, NRIs buy properties with their close relatives in India to avoid any hassles.
Can a non-resident transfer or sell his/her property? While the RBI doesn’t restrict NRI buyers from transferring or selling their properties, there is a cap on the repatriation of sale proceeds. NRIs or PIOs are allowed to repatriate up to one million dollars per financial year (April-March) out of a Non-Resident (Ordinary) Rupee (NRO) account, subject to compliance with the applicable tax requirements. The amount also includes sale proceeds of assets which is acquired by the way of inheritance or settlement.
Additionally, suppose an NRI/PIO has used their funds out of an NRE account to buy the property. In that case, the repatriation of sale proceeds is restricted to not more than two properties (in the case of residential properties). Also, the amount of the repatriation which flows out of India should not exceed the amount which was received (in foreign exchange) through the normal banking channels or from the funds held in FCNR or NRE Account for the purchase of the immovable property.