Foreign Investments in India (Part: 3)
Acquisition and Transfer of Immovable Property in India & Investment in
Partnership Firm/Proprietary Concer

Acquisition and Transfer of Immovable Property in India

A person resident outside India who is a citizen of India (NRI) can acquire by way of purchase any immovable property in India other than agricultural/ plantation /farm house.He may transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India or a person resident in India . He may however transfer, agricultural land/ plantation property/ farm house only to Indian citizens permanently residing in India.

A person resident outside India who is a person of Indian Origin ( PIO) can acquire any immovable property in India other than agricultural land/ farm house/ plantation property -

1. By way of purchase out of funds received by way of inward remittance through normal banking channels or by debit to his NRE/FCNR(B)/NRO account.

2. By way of gift from a person resident in India or a NRI or a PIO

3. By way of inheritance from a person resident in India or a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force or FEMA regulations at the time of acquisition of the property.

A PIO may transfer any immovable property other than agricultural land/Plantation property/farmhouse in India .

1. By way of sale to a person resident in India

2. By way of gift to a person resident in India or a Non resident Indian or a PIO.

A PIO may transfer agricultural Land/ Plantation property /farmhouse in India by way of sale or gift to person resident in India who is a citizen of India.

Foreign Embassy/Diplomat/Consulate General has been allowed to purchase/ sell immovable property in India other than agricultural land/ plantation property / farm house provided (i) clearance from Government of India, Ministry of External Affairs is obtained for such purchase/ sale, and (ii) the consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through banking channel.

A person resident outside India who has a branch, office or other place of business, (excluding a liaison office) for carrying on his business activity with requisite approvals, in India may acquire an immovable property in India which is necessary for or incidental to carrying on such activity provided that all applicable laws, rules, regulations or directions for the time being in force are duly complied with. The entity/concerned person would have to file a declaration in the form IPI with the Reserve Bank, within ninety days from the date of such acquisition. The non-resident is eligible to transfer by way of mortgage the said immovable property to an authorised dealer as a security for any borrowing.

In the event of sale of immovable property other than agricultural land/ farm house/ plantation property in India by NRI/PIO, the authorised dealer will allow repatriation of sale proceeds outside India provided;

1. the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of FEMA Regulations;

2. the amount to be repatriated does not exceed (a) the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in Foreign Currency Non-Resident Account or (b) the foreign currency equivalent as on the date of payment, of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property.

3. In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties

4. In the case of sale of immovable property purchased out of Rupee funds, ADs may allow the facility of repatriation of funds out of balances held by NRIs/PIO in their Non-resident Rupee( NRO) accounts upto US$ 1 mio per year , provided that the property has been held for a period not less than 10 years or for a combined period of 10 years partly as property and as sale proceeds in NRO account and subject to production of undertaking by the remitter and a certificate from the Chartered Accountant in the formats prescribed by the CBDT

No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan shall acquire or transfer immovable property in India, other than lease, not exceeding five years without prior permission of Reserve Bank.

resident outside India are not permitted to acquire any immovable property in India unless such property is acquired by way of inheritance.

Foreign Nationals of non Indian origin who have acquired immovable property in India with the specific approval of the Reserve Bank cannot transfer such property without prior permission of the Reserve Bank

A non-resident Indian or a person of Indian origin resident outside India may invest by way of contribution to the capital of a firm or a proprietary concern in India on non-repatriation basis provided -

1. Amount is invested by inward remittance or out of NRE/FCNR/NRO account maintained with AD

2. The firm or proprietary concern is not engaged in any agricultural/plantation or real estate busines i.e. dealing in land and immovable property with a view to earning profit or earning income there from.

3. Amount invested shall not be eligible for repatriation outside India.

NRIs/PIO may invest in sole proprietorship concerns/ partnership firms with repatriation benefits with the approval of Government /RBI.

No person resident outside India other than NRIs/PIO shall make any investment by way of contribution to the capital of a firm or a proprietorship concern or any association of persons in India provided that the RBI may, on an application made to it, permit a person resident outside India to make such investment subject to such terms and conditions as may be considered necessary.

In terms of Regulation 4(b) and (e) of RBI Notification No.FEMA 24/2000-RB dated May 3,2000 an NRI or PIO cannot invest in a firm or proprietorship concern engaged in any agricultural/plantation activity or real estate business or engaged in Print Media.