Comparative statement of Companies Act 2013 Vs 1956

[JAGANNATH PADHY]

 IS THE PERSON RESIDENT OF INDIA BUT NOT CITIZEN OF INDIA, CAN ACQUIRE AN AGRICULTURAL LAND IN INDIA?

ANSWER:  NO

REASON:

Acquisition of Real Estate by foreign nationals, whether it is land or premises, is governed by the Foreign Exchange and Management Act, 1999 (FEMA). This Act was amended in 2002 and is dependent on the status of the foreign national including, but not limited to, the foreign national’s resident status. The Ministry of Commerce and Industry governs foreign investments into India, with the Reserve Bank of India (the RBI), as the regulatory authority in most cases. 

Foreign nationals can acquire land or property in India only under the following circumstances:

• Where the acquisition of property is by an Indian company owned by a foreign national which has been set up to conduct activities permitted under the FDI norms or
• The foreign national is a Person of Indian Origin (PIO). 

Person Resident in India -:  Under FEMA, a person resident in India is defined as a person residing in India for more than 182 days during the course of the preceding financial year (April-March) and who has come to or stays in India either for taking up employment, carrying on business or vocation in India or for any other purpose, that would indicate his intention to stay in India for an uncertain period. FEMA determines residential status by operation of law and the onus is on an individual to prove the residential status, if questioned by any authority.

In all other circumstances applications have to be made to the RBI, which are considered on a case-by-case basis subject to the FEMA requirements.  In addition to these provisions that apply all over India there may be specific state laws that regulate the purchase or acquisition of property in that state.  For instance, the state of Goa has a minimum period of residency requirement before any individual can acquire a property in Goa.

FDI Norms for Investment in Property

• A foreign national can invest in India in the following instances:
• In case of development of serviced housing plots, the minimum land is 25 acres
• For construction-development projects, a minimum built up area of 50,000 sq. meters.
• In case of a combination project, any one of the above conditions would suffice
• Minimum capitalization of USD 10 million for wholly owned subsidiaries and USD 5 million for joint ventures with Indian partners
• Original investment cannot be repatriated before a period of three years from fulfilling minimum capitalization requirements. The investor may be permitted earlier repatriation with prior government approval. 
• Investments under above mentioned instances includes the development of townships, residential developments, retail malls, commercial office spaces and IT parks, hotels and leisure resorts. Foreign developers may also invest in infrastructure projects, subject to the above parameters.  However, an investor is not permitted to sell undeveloped plots, nor is the investor permitted to invest in plantations, agricultural land, or farm houses in India.

Transfer of Immovable Property:

Transfer by Sale: An NRI can transfer by sale residential or commercial property in India to a person resident in India, or an NRI, or a PIO.  A PIO can sell property in India to a person resident in India with the prior approval of the RBI. Foreign nationals of non-Indian origin can sell property, plantation, agricultural land or farm house in India with prior approval from the RBI to a person resident in India, an NRI, or a PIO.

Transfer by Gift: An NRI or a PIO may gift residential or commercial property to a person resident in India, or an NRI or a PIO.   Foreign national of non-Indian origin can make a gift of property only after prior approval from the RBI.

Transfer through Mortgage: An NRI or a PIO can mortgage residential or commercial property to an authorized dealer or housing finance institution in India without the approval of the RBI, and to a party abroad with prior approval from the RBI. A foreign national of non-Indian origin can mortgage property only with prior approval from the RBI. A foreign company, which has established a Branch Office or other place of business in accordance with FEMA, has general permission to mortgage the property with an authorized dealer in India as security for borrowing.

 Transfer of Agricultural Land, Plantation Property, Farm House in India Owned Or Held By A Non-Resident:

An NRI or a PIO may sell agricultural land or plantation property or farm house to a person resident in India who is a citizen of India.  Foreign national of non-Indian origin resident outside India need prior approval from the RBI to sell agricultural land, plantation property or a farm house in India. 

 My opinion:

• Indian Laws governing the investment opportunities by NRIs are governed by Foreign Exchange Management Act, 1999 (FEMA), according to which NRIs and PIOs in India (non-resident Indians and Persons of Indian Origin) are prohibited from buying agricultural land in India.
• If the person who is Indian origin and resident of India (as per FEMA Act) but not a citizen of India, he also cannot buy or purchases of Agricultural Land in India.

Indian NRIs And Foreign Citizen  even He is resident of india As per FEMA Rule Satisfied by person is not sufficient for same reason and   cannot buy agricultural land in India and this is applicable to the whole of India. Approval is required from the Reserve bank of India which one can assume is not easily available and this would depend only on individual circumstances. In addition to that, some State Governments in India have rules that allow only farmers to buy agricultural land in their State and this restricts even Indian citizens from buying agricultural land unless they come from a family of farmers. Therefore, one cannot complain that due to the above prohibition, NRI investment options have been mitigated. On the other hand, NRIs who have acquired foreign citizenship, are sometimes mislead into believing that they cannot continue to hold agricultural land as foreigners cannot hold agricultural land in India. But this is not all encompassing, because Indian NRI’s can continue to hold agricultural land or any other property they own in India provided they had acquired them legally before accepting foreign citizenship. NRIs and Foreign Citizens of Indian Origin cannot acquire agricultural land, even by way of gift. However they can acquire agricultural land by way of inheritance and an agricultural property or land thus acquired can only be sold to a resident in India and not to an NRI.

By permission of the RBI, an NRI and a PIO can freely purchase immovable property in India. This permission, however, covers purchase of residential and commercial property only.  All foreign nationals, NRIs and PIOs are not permitted to purchase agricultural land, plantation property and/or a farmhouse in India unless they have obtained specific approval from the RBI and the proposal is considered in consultation with the Government of India.  However, once general permission from the RBI has been obtained there is no restriction to the number of residential and commercial property that an NRI or PIO can purchase. 

A foreign national who is residing in india for more than 182 days during the course of the preceding financial year for taking up employment of carrying on business/ vocation of for any other purpose indicating his intention to stay for an uncertain period can acquire immovable property in india as he would be a person resident in india as per section 2(v) of FEMA, 1999. To be treated as a person resident in India under FEMA, a person has not only to satisfy the condition of the period of stay (being more than 182days during the course of proceeding financial year) but also his purposes of stay in India for an uncertain period. In this regard, to be eligible, the intention to stay has to be unambiguously established with supporting documentation including visa.

A foreign national of non-Indian origin, resident outside India can neither purchase any immovable property in India (except as provided above), nor can such a person be a joint holder of immovable property purchased by an NRI or PIO. However, such a foreign national may take on lease residential accommodation without RBI permission provided the lease is for less than a five-year period. In addition, the foreign national residing in India may purchase a property after obtaining government approval and fulfilling other applicable requirements.