FOREIGN EXCHANGE MANAGEMENT (ACQUISITION AND TRANSFER OF IMMOVABLE PROPERTY IN INDIA) REGULATIONS, 2018

[Mr. M. GOVINDARAJAN]

The Reserve Bank of India, earlier, made the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000 vide Notification No. 21/2000-RB dated 03.05.2000 which came into effect from 01.06.2000.

Now the Reserve Bank of India, in supersession of the said notification as amended from time to time, made ‘The Foreign Exchange Management (Acquisition and Transfer of  Immovable Property in India) Regulations, 2018, vide Notification NO. FEMA 21(R)/2018-RB, dated 26.03.2018.   These regulations  came into effect from 26.03.2018.

These regulations provide for-

• Acquisition and transfer of property in India by a non resident Indian or an Overseas Citizen of India;
• Acquisition of immovable property for carrying on a permitted activity;
• Purchase/sale of immovable property by foreign embassies/Diplomats/Consulate Generals;
• Joint acquisition by the spouse of an NRI or an OCI;
• Acquisition by a Long Term visa holder.

Acquisition and transfer of property in India by a NRI or OCI

Regulation 2(c) defines the expression ‘nonresident Indian’ (NRI) as a person resident outside India who is a citizen of India.

Regulation 2(d) defines the expression ‘Overseas Citizen of India’ (OCI) as a person resident outside India who is registered as an Overseas Citizen of India Card holder under section 7(A) of the Citizenship Act, 1955.

1. An NRI or an OCI may acquire immovable property in India other than agricultural land and/farm house/plantation property.The consideration, if any, for transfer shall be made out-

• funds received in India through banking channels by way of inward remittance from any place outside India; or
• funds held in any nonresident account maintained in accordance with the provisions of the Act, rules or regulations framed there under.

No payment for any transfer of immovable property shall be made either by traveler’s cheque or by foreign currency notes or by any other mode other than those specifically permitted under this clause.

2. An NRI or OCI may acquire any immovable property in Indian other than agricultural land/farm house/plantation property by way of gift from a person resident in India or from an NRI or from an OCI, who in any case is a relative as defined in section 2(77) of the Companies Act, 2013.  section 2(77) of the Companies Act, 2013 defines the term ‘relative’ with reference to any person, means anyone who is related to another, if-

• they are members of a Hindu Undivided Family;
•  they are husband and wife; or
• one person is related to the other in such manner as may be prescribed;

3. An NRI or OCI may acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property-

• in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations; or
• from a person resident in India.

4. An NRI or OCI may transfer any immovable property in India to a person resident in India.

5. An NRI or OCI may transfer any immovable property other than agricultural land/farm house/plantation property to an NRI or an OCI.

Acquisition of immovable property for carrying on a permitted activity

A person resident outside India who has established in India, a branch, office or other place of business for carrying in India any activity, excluding a liaison office may acquire any immovable property in India, which is necessary for or incidental to carrying on such activity provided all applicable laws, rules, regulations or directions for the time being in force are duly complied with and the person files with the Reserve Bank of India, a declaration in the form IPI as prescribed by Reserve Bank of India, from time to time, not later than 90 days from the date of such acquisition.

A person resident outside India who has established in India, a branch office or other place of business for carrying in India any activity, excluding  a liaison office may transfer by way of mortgage to an authorized dealer as a security for any borrowing the immovable property acquired. 

No person of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Hong Kong or Macau or Nepal or Bhutan or Democratic People’s Republic of Korea shall acquire immovable property, other than on lease not exceeding 5 years without prior approval of the Reserve Bank of India.

Purchase/sale of immovable property by Foreign Embassies/Diplomats/Consulate Generals

A foreign Embassy/Diplomat/Consulate General may purchase/sell immovable property in India, other than agricultural land/plantation property/farm house provided-

• clearance from Government of India, Ministry of External Affairs is obtained for such purchase/sale; and
• the consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through banking channels.

Joint acquisition by the spouse of an NRI or an OCI

A person resident outside India, not being a NRI or an OCI, who is a spouse of a NRI or an OCI may acquire one immovable property, other than agricultural land/farm house/plantation property, jointly with his/her NRI/OCI spouse, subject to the following-

• The consideration for transfer shall be made out-

• funds received in Indian through banking channels by way of inward remittance from any place outside India; or
• funds held in any nonresident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank.

• No payment for any transfer of immovable property shall be made either by traveler’s cheque or by foreign currency notes or any other mode other than those specifically permitted;
• If the marriage has been registered and substituted for a continuous period of not less than 2 years immediately preceding the acquisition of such property;
• The nonresident spouse is not otherwise prohibited from such acquisition.

Acquisition by a Long Term Visa holder

A person, being a citizen of Afghanistan, Bangladesh or Pakistan belonging to minority communities in those countries, namely, Hindus, Sikhs, Buddhists, Jains, Parsis and Christians who is residing in India and has been granted a Long Term Visa by the Central Government may purchase only one residential immovable property in India as dwelling unit for self-acquisition and only one immovable property for carrying out self employment subject to the following conditions-

• the property should not be located in and around restricted/protected areas so notified by the Central Government and cantonment areas;
• the person submits a declaration to the Revenue Authority of the District where the property is located, specifying the source of funds and that he/she is residing in India on LTV;
• the registration documents of the property should mention the nationality and the fact that such person is on LTV;
• the property of such person may be attached/confiscated in the event of his/her indulgence in anti-India activities;
• a copy of the documents of the purchased property shall be submitted to the Deputy Commissioner of Police (DCP)/Foreigners Registration Office (FRO)/Foreigners Regional Registration Office (FRRO) concerned and to the Ministry of Home Affairs (Foreigners Division);
• such person shall be eligible to sell the property only after acquiring Indian citizenship.However transfer of the property before acquiring Indian citizenship shall require prior approval of DCP/FRO/FRRO.

Repatriation of sale proceeds

Section 6(5) of FEMA Act provides that the Reserve Bank may, in consultation with the Central Government, specify a person resident outside India may hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India.

Such person or his successor shall not except with the general or specific permission of RBI, repatriate outside India, the sale proceeds of any immovable property referred to as above.

Regulation 2(e) defines the expression ‘repatriation outside India’ as the buying or drawing of foreign exchange from an authorized dealer in India and remitting it outside India through banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorized dealer from which it can be converted in foreign currency.

In the event of sale of immovable property other than agricultural land/farm house/plantation property in Indian by an NRI or an OCI, the authorized dealer may allow repatriation of the sale proceedings outside India, subject to the following conditions-

• the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of his acquisition or the provisions of these regulations;
• the amount for acquisition of the immovable property was paid in foreign exchange received through banking channels or out offunds held in Foreign Currency Non Resident Account or out of funds held in Non Resident External account;
• in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

In the event of failure in repayment of ECB availed by a person resident in India under the provisions of FEMA (Borrowing or Lending in Foreign Exchange) Regulations,2000 as amended from time to time, a bank which is an authorized dealer may permit the Overseas lender or the security trustee to sell the immovable property on which the said loan has been secured only to a person resident in India and to repatriate the sale proceeds towards outstanding dues in respect of the said loan and not any other loan.

Prohibition

The Regulations impose prohibition-

• on acquisition or transfer of immovable property in India by citizens of certain countries;
• on transfer of immovable properties in India.

No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Hong Kong or Macau or Democratic People’s Republic of Korea (DPRK) without prior permission of the RBI shall acquire or transfer immovable property in India, other than lease, not exceeding five years.  This prohibition shall not apply to an OCI.

No person resident outside India shall transfer any movable property in India.  The RBI may, for sufficient reasons, permit the transfer, subject to the conditions as may be considered necessary.  A bank which is an authorized dealer may, subject to the directions issued by the RBI in this behalf, permit a person resident in India or on behalf of such person to create charge on his immovable property in India in favor an Overseas lender or security trustee, to secure an ECB availed under the provisions of the FEMA (Borrowing or Lending in Foreign Exchange) Regulations,2000, as amended from time to time. 

An authorized dealer in India being the Indian correspondent of an overseas lender may, subject to the directions issued by the RBI in this regard, create a mortgage on an immovable property in India owned by an NRI or an OCI, being a director of a company outside India, for a loan to be availed by the company from the said overseas lender.

The funds shall be used by the borrowing company only for its business purposes overseas.   In case of invocation of charge, the Indian bank shall sell the immovable property to an eligible acquirer and remit the sale proceeds to the overseas lender.

A person resident outside India who has acquired any immovable property in India in accordance with foreign exchange laws in force at the time of such acquisition or with the general or specific permission of the Reserve bank may transfer such property to a person resident in India provided the transaction takes place through banking channels in India and provided that the resident is not otherwise prohibited from such acquisition.