Non-Resident Indian (NRI)
Non-Resident Indian or NRI refers to a person of Indian origin staying in a different global location for employment/carrying on business or vocation. They are spread across the world with an estimated population of 40 to 100 million. Most of the NRI populate have migrated to alien countries for better job prospect and future but with the advent of global MNCs (Multinational companies) and implementation of revised foreign policies in India, the NRIs are driven to become a part of this fastest emerging economy.
To encourage this initiation of NRIs to resettle and return back to India, they are granted facilities like maintenance of bank accounts and investments in immovable properties in India. To appreciate the interest of NRIs in India’s immovable properties, the government of India has come up with beneficial investment policies for the NRIs. The Reserve Bank of India allows them to acquire, hold, transfer or dispose off land by way of sale or inheritance. Such properties are meant for the purchaser''''''''s bonafide residential use and they are purchased through normal banking channels/home loans or NRE and FCNR.
Exchange Control Regulations
In recent years, India has been witnessing unprecedented growth in the real estate sector fueled by the increased business activity. Real estate development in India is estimated at $12 billion and growing at 30% every year. Though all segments of real estate business such as corporate, retail and residential have been driving this growth, investment in residential property itself constitutes 80% of this sector.
Non-Resident Indians (NRIs) are one of the key contributors to the growth of the real estate industry and considering the immense potential in India, they are likely to step-up the investment in future. The Indian government has considerably eased the restrictions relating to investments by NRIs in house property. There is virtually no restriction or approval required for an NRI to invest in properties in India from funds received in India through normal banking channels or held in Non-Resident External (NRE) account/ Foreign Currency Non-Resident (FCNR) account (B)/ Non-Resident Ordinary (NRO) rupee account. However, investment in agricultural land / plantation property / farm house is currently prohibited. The recurring rental income earned on letting out of property is also freely reparable.
Below is an overview of the key exchange control regulations that should be considered by NRIs while investing in house property in India:
- No permission is required by non-resident Indian nationals to acquire immovable property in India.
- Foreign nationals of Indian origin, whether resident in India or abroad, have been granted general permission to purchase immovable property in India.
- The purchase consideration should be met either out of inward remittances in foreign exchange through normal banking channels or out of funds from NRE/FCNR accounts maintained with banks in India.
- The non-resident Indians who are staying abroad may enter into an agreement through their relatives and/or by executing the Power of Attorney in their favour as it is not possible for them to be present for completing the formalities of purchase (negotiating with the builder or developer, drafting and signing of agreements, taking possession, etc.) These formalities can be completed through some known person who can be given the Power of Attorney for this purpose. Power of Attorney should be executed on the stamp paper before the proper authorities in foreign countries. Power of Attorney cannot be drafted on the stamp paper bought in India.
- The foreign nationals of Indian origin are required to file a declaration in form IPI 7 with the Central Office of Reserve Bank at Bombay within a period of 90 days from the date of purchase of immovable property.
- Such property can be sold to another foreign national of Indian origin provided funds towards the purchase consideration are either remitted to.
- Such residential properties can be given on rent. But such income cannot be remitted abroad and will have to be credited to the ordinary non-resident rupee account of the owner of the property.