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Acquisition of Immovable Property by NRIs and PIOs in India

With the real estate market in India slated to multiply four fold by 2010 to $45-50 billion, it is not surprising that foreign investors are eager to share the gains from an investment in the country.

For Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO), investment in Indian real estate is monetarily rewarding and emotionally gratifying, as it helps maintain bonds with their homeland. The Reserve Bank of India (RBI) has relaxed norms and issued simple guidelines for the convenience of NRIs and PIOs wishing to invest in Indian realty under the provisions of the Foreign Exchange Management Act, 1999.

NRIs and PIOs can acquire residential and commercial property in India, though holding agricultural land, plantations and farmhouses is not allowed by the Government of India. Resident Indians owning such property must inform the RBI if and when they acquire citizenship of another country.

NRIs and PIOs are also eligible to inherit or be gifted property in India, and in turn, can sell, gift or transfer such immovable assets to resident Indians, NRIs or PIOs.

However, persons of Indian origin residing in Pakistan, Bangladesh, China, Afghanistan, Iran, Nepal, Sri Lanka and Bhutan are not permitted to own or acquire any kind of property in India. PIOs in this category can only reside on rented property, subject to a maximum lease of 5 years.

As far as foreign direct investment goes, the Ministry of Commerce and Industry relaxed its policies in March 2005, and investment from NRIs falls within its purview. Barring a few sectors, 100% investment is allowed under the automatic route from foreign and/or NRI investors.

FDI flows are welcomed in building up infrastructure in urban locations, and Special Economic Zones, Export Oriented Units, industrial parks, hardware and software technology parks have been permitted under the automatic route for 100% investment.

NRIs and PIOs have been offered additional entry options to invest in Indian firms or proprietary concerns on a non-repatriation basis through their NRE Account, FCNR Account or NRO accounts. In case they wish to avail of repatriation benefits government approval is required for the same.

Acquisition of Immovable Property by Inheritance

- In case of inheritance of agricultural land or plantation or farm house property, the RBI has to be informed.

Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan are not permitted to acquire or transfer property in India. Only a lease rental of less than 5 years is allowed for such persons.

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