NRIs have been permitted to invest up to 100% equity in real estate development activity, both through the RBI and Foreign Investment Promotion Board (FIPB) routes. Investments made by the NRIs in the real estate sector, however, has one crucial rider.
There is a three year lock-in period on original investment and 16% cap on dividend repatriation. There are general rules that apply to NRI's which must be adhered to and followed at all times.
- An NRI , who has been permitted by Reserve Bank to establish a branch, or office, or place of business in India (excluding a Liaison Office), has general permission of the Reserve Bank to acquire immovable property in India, which is necessary for, or incidental to, the activity. However, in such cases a formal declaration is required to be filed within 90 days of the acquisition of the immovable property with the central bank.
- An NRI does not require any permission to acquire any immovable property in India with exception to agricultural/plantation property or a farm house. He is also entitled to transfer this property to any resident Indian without the prior permission of any government agency. However, if the property is an agricultural/plantation property or a farm, this transfer will only materialize after seeking the official approval.
- An NRI is entitled to buy any immovable property other than agricultural land/farm house/plantation property in India through the remittances sent by him or by pulling out funds from his non-resident account maintained in accordance with the provisions laid by the central bank.
- An NRI can also acquire any immovable property in India other than agricultural land/farm house/plantation property by way of gift from a resident citizen in India or from another NRI settled elsewhere.
- An NRI can also inherit the immovable property of another NRI provided the property in question was bought in accordance with the provisions of the foreign exchange law in force at the time of acquisition.
- Repatriation outside India, including credit to RFC, NRE or FCNR account, of sale proceeds of any immovable property situated in India, however, requires prior permission of the Reserve Bank of India.
In the event of sale of immovable property by an NRI in India, the authorised dealer may allow repatriation of the sale proceeds outside India, provided following conditions are fulfilled:
- The immovable property was acquired by the seller in accordance with the provisions of the Exchange Control Rules/Regulations/Law in force at the time of acquisition, or the provisions of the Regulations framed under the Foreign Exchange Management Act (FEMA), 1999.
- The sale takes place after three years from the date of acquisition of such immovable property or from the date of payment of final installment of consideration for its acquisition, whichever is later.
The amount to be repatriated does not exceed:
- 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.
- 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.
- in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.
*NRIs are also free to rent out their immovable property in India without seeking any permission from the Reserve Bank. The rental income will be a part of his current account. However, NRIs who have acquired citizenship of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan require prior permission of Reserve Bank for acquiring or transferring any immovable property in India.