NRI Buyer's Guide

What are the rules governing the acquisition of immovable property?

One should understand that in the case of immovable property, the citizenship of the person resident outside India assumes importance. The rules are different for:

• A person Resident outside India who is an Indian citizen.
• A person Resident outside India who is a person of Indian origin ( refer to q12).
• Foreign Nationals of Non Indian origin.

NRIs/PIO can acquire immovable properties (residential/commercial) without any restriction. They can acquire the immovable property jointly with other NRI/PIO. However they cannot acquire the property jointly with a foreign national of non-Indian origin. They need not file any documents with Reserve Bank of India.


Rules for Indian Citizen Resident Outside India for acquiring immovable property by way of :

I - Acquisition

Purchase - General permission is granted for purchasing any immovable property in India (other than agricultural land, plantation or farm house property.). Payment must be done through normal banking channels. Payment cannot be made either by traveller's cheque or by foreign currency notes.

Gift - General permission is granted to acquire any immovable property (other than agricultural land, plantation or farmhouse property).

Inheritance - General permission is granted for inheritance of immovable property including agricultural land, plantation or farm house property .from a person resident in India, or a person resident outside India who may be an Indian citizen or foreign citizen of Indian origin, provided such person had acquired said property in accordance with the provisions of Foreign Exchange Law in force at the time of acquisition. Hence Agricultural land, plantation or farm-house property can be acquired by way of inheritance only

II - Transfer
General permission is available for transfer of any immovable property (other than agriculture land, plantation property and farm house) to Person Resident in India who is citizen of India or a PIO

Rules for an NRI who is a foreign citizen of Indian origin for acquiring immovable property by way of:

I - Acquisition

Purchase - There is a general permission to acquire any immovable property (other than agricultural land, plantation or farm-house property) by way of purchase, provided the payment is made out of foreign exchange inward remittance or by debit to any Non Resident bank account in India, i.e. NR(E), FCNR(B) or NRO a/c. Payment cannot be made either by traveller's cheque or by foreign currency notes

Gift - General permission is granted to acquire any immovable property (other than agricultural land, plantation or farmhouse property) by way of gift from a person (donor) who is

• a person resident in India, or
• a person resident outside India (an NRI) who is Indian citizen or foreign citizen of Indian origin

Inheritance - General permission is granted for inheritance of immovable property including agricultural land, plantation or farm-house property from

• a person resident in India, or
• person resident outside India who may be an Indian citizen or foreign citizen of Indian origin provided such person had acquired said property in accordance with the provisions of Foreign Exchange Law in force at the time of acquisition

II - Transfer:

General permission is available for transfer for any immovable property (other than agriculture land, plantation property and farm house) to a person resident in INDIA Only. Therefore, PIO should obtain prior approval of RBI for transfer of immovable property to a person resident out side India who is a citizen of India or a PIO.
Hence Agricultural land, plantation or farmhouse property can be acquired by way of inheritance only

Rules for Foreign National (Foreign Citizen of non-Indian origin)

• A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of purchase.
• A Foreign National of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan may acquire only residential accommodation on lease, not exceeding five years for which he/she does not require prior permission of Reserve Bank of India.
• Cannot acquire by way of purchase or gift agricultural land/plantation property/farm house in India.
• Cannot acquire residential/commercial property in India by way of gift.
• With the specific approval of Reserve Bank, hold any immovable property in India acquired by way of inheritance from a person resident outside India, provided the bequeathor had acquired such property in accordance with the provisions of foreign exchange law in force at the time of acquisition or under FEMA regulations.
• Can hold immovable property acquired by way of inheritance from a person resident in India as per the provisions of Section 6(5) of the Foreign Exchange Management Act, 1999 ( that is a person resident outside India may hold, own, transfer, immovable property situated in India if such property was acquired b him when he was a resident in India or inherited from a person who was resident in India)
• Need to seek prior approval of Reserve Bank for transfer by way of sale residential/property in India acquired with the specific permission of Reserve Bank to a person resident in India or outside India.
• Need to seek prior approval of Reserve Bank for transfer, by way of sale, agricultural land/plantation property/farm house acquired in India.
• Need to seek prior approval of Reserve Bank for transfer by way of gift agricultural land/plantation property/farm house acquired by him in India. Need to seek prior approval of RBI for remittance of sale proceeds of immovable property acquired by way of inheritance. FEM 21 (a))
• For mortgaging the residential/commercial properties, he should seek prior approval of RBI. However, immovable property purchased by a person resident outside India who has established a Branch Office or other place of business for carrying on in India any activity in accordance with FERA/FEMA regulations, may under general permission available, mortgage such a property with an authorized dealer as a security for any borrowing.

To whom can a NRI having Indian Citizenship transfer or sell his immovable property?
Vide the general permission given a NRI can sell or transfer any immovable property (other than agricultural land, plantation, farmhouse property) to

• a person resident in India, or
• person resident outside India, who is an Indian citizen or
• person resident outside India, being a foreign citizen of Indian origin

However he can sell or gift or transfer of agricultural land, plantation or farm house properties to a resident Indian only.

To whom can a NRI having “Foreign Citizenship but of Indian origin” transfer or sell his immovable property?
General permission is granted for sale of any immovable property (other than agricultural land, plantation or farmhouse property) to a person who is resident in India. He would need to seek Reserve Bank prior approval for transfer by way of sale residential/commercial property in India to a NRI or a PIO

Can a NRI freely repatriate the sale proceeds of immovable property?

• The acquisition should be in accordance with the existing Foreign Exchange Laws
• The purchase price was met out of Foreign Exchange Inward Remittance or NRE / FCNR (B ) account, and
• In the case of residential properties, repatriation is restricted to a maximum of two properties. Such restriction do not apply to commercial or industrial properties
• The amount of repatriation is restricted to foreign exchange equivalent of the purchase price i.e. profits/gains are not allowed to be repatriated.

However, in view of the on going liberalisation RBI has freely permitted repatriation of funds lying in NRO account up to 1 million dollars per financial year which inter-alia includes sale of immovable property.