A person of Indian origin (PIO) who can claim to have Indian lineage doesnâ€™t require any special permission to buy property in India. However, there is a clause in the Foreign Exchange Management Act (FEMA), 1999, which stipulates that a foreign national of Indian origin cannot purchase agricultural land or invest in a farmhouse or plantation in India. Such properties are limited to resident Indians only.
Payment for real estate investments should also be done in Indian rupees, with funds transferred to India through legal banking channels.
Foreign nationals of Indian origin who have held Indian passports in the past or who can claim Indian lineage are known as PIOs and are covered under the general permission act to buy property in India â€“ without filing for permission from the RBI.
However, all related payments have to be made through funds transferred to India through normal & legitimate banking channels or via funds held in NRE/FCNR(B) accounts. Alternatively, payments can be made through NRO accounts maintained in India. Payments cannot be made from outside India, through foreign currency or travelersâ€™ cheques.
Non-resident Indians (NRIs) who are not physically present in India can still be able to buy property in India by executing a power of attorney in the name of a trusted individual or agent, who can make the transactions on their behalf.
The Power of Attorney formalities should be executed on stamp paper in the presence of relevant authorities.
There is no specific permission required by non-resident Indians residing abroad from the Reserve Bank of India (RBI) when making real estate investments within India. This is because the RBI has given general permission to non-resident Indians for investing in residential and commercial properties.
However, there is a clause in the Foreign Exchange Management Act (FEMA),1999, and executed in June 2000 that prevents non-resident Indians from investing in agricultural land, farmhouse or plantation properties in India.
A foreign national of Indian origin is also referred to as a person of Indian origin or a PIO. These are people living abroad who have once held an Indian passport or have relatives of Indian origin. Buying immovable property in India is regulated by the Foreign Exchange Management Act, 1999, and entails that non-resident Indians and PIOs cannot buy property in India that is agricultural land, a plantation or a farmhouse. PIOs will need to file a declaration form IPI 7 with the central office of the RBI within 90 days of purchase of immovable property.
Non-resident Indians or NRIs who hold Indian passports are also eligible for availing of NRI loans in rupees up to 1 (one) crore when buying property â€“ just like any other resident Indian. However, there are slight differences when it comes to the repayment of EMIs. Monthly remittances have to be made in rupees from an NRO, NRE or FCNR account. The money remitted to these accounts should also be done through legal banking channels
Loan applications are assessed by banks to ascertain eligibility aspects such as income to debt ratio, financial capability, etc. Most banks ask for a resident co-applicant or an NRI guarantor who will need to provide identity, address, and income proofs.
Income earned as rent on real estate investments by Non-resident Indians (NRIs) will need to be deposited in Ordinary non-resident rupee (NRO) accounts. While FEMA allows rent income to be deposited in NRE accounts, banks prefer NRO account deposits only. As long as the income is earned in India, it shall remain taxable in accordance with Indian laws too.
To repatriate rental income abroad, it will have to be first transferred from an NRO account to an NRE account to become eligible.To repatriate rental income abroad, it will have to be first transferred from an NRO account to an NRE account to become eligible.
Repatriation of proceeds of sales to a country outside India is possible, provided certain clauses are fulfilled. According to the Reserve Bank of India (RBI), the sales proceeds to be repatriated should not exceed the foreign currency brought into the country for the property’s initial purchase. Proceeds can be repatriated through an NRE account only.
The RBI has further made repatriation easier for non-resident and PIOs by removing the lock-in period for retaining the real estate investment before its sale. However, only the proceeds of two residential properties can be repatriated abroad.
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