What are the formalities required to be completed by foreign citizen of Indian Origin for purchasing residential immovable property in India under the general permission?

Ans: They are required to file a declaration
in form IPI 7 with the Central Office of Reserve Bank at Mumbai
within a period of 90 days from the date of purchase of immovable
property or final payment of purchase consideration along with
a certified copy of the document evidencing the transactions
and bank certificate regarding the consideration paid.

Q2). Can such property be sold without the permission
of Reserve Bank?

Ans: Yes, Reserve Bank has granted general
permission for sale of such property. However whether the property
is purchased by another foreign citizen of Indian Origin, funds
towards the purchase consideration should either be remitted
to India or paid out of balance in NRE/FCNR accounts.

Q3). Can sale proceeds of such property if and when sold
be remitted out of India?

Ans: In respect of residential properties
purchased on or after 26th May 1993, Reserve Bank considers
applications for repatriation of sale proceeds up to the consideration
amount remitted in foreign exchange for the acquisition of the
property for two such properties. The balance amount of sale
proceeds if any or sale proceeds in respect of properties purchased
prior to 26th May 1993 will have to be credited to the ordinary
non-resident rupee account of the owner of the property.

Q4). In what manner the purchase consideration for the
residential immovable property should be paid by foreign citizen
of Indian Origin under the general permission?

Ans: The purchase consideration should be
met either out of inward remittances in foreign exchange through
normal banking channels or out of funds from NRE/FCNR accounts
maintained with banks in India.

Q5). Are any conditions required to be fulfilled if repatriation
of sale proceeds is desired?

Ans: Applications for repatriation of sale
proceeds are considered provided the sale takes place after
three years from the date of final purchase deed from the date
of payment of final installment of consideration amount, whichever
is later.

Q6). What is the procedure for seeking such repatriation?

Ans: Applications for necessary permission
for remittance of sale proceeds should be made inform IPI 8
to the Central Office of Reserve Bank at Mumbai within 90 days
of the sale of the property.

Q7). Can foreign citizen of Indian Origin acquire or
dispose of residential property by way of gift?

Ans: Yes. Reserve Bank has granted general
permission to foreign citizen of Indian Origin to acquire or
dispose of properties up to two houses by way of gift from or
to a relative who may be an Indian Citizen or a person of Indian
origin whether resident in India or not, subject to compliance
with applicable tax laws.

Q8). Can immovable property held in India, be transferred
by way of gift to relatives/registered charitable trusts/organizations
in India?

Ans: Yes. General permission has been granted
by Reserve Bank to non-resident persons(foreign citizen) of
Indian Origin to transfer by way of gift immovable property
held by them in India to relatives and charitable trust/organizations
subject to the conditions that the provisions of any other law,
including Foreign Contribution (Regulation) Act, 1976, as applicable,
are duly complied with.

Q9). Can foreign citizen of Indian Origin acquire commercial
properties in India?

Ans: Yes. Under the general permission granted
by Reserve Bank properties other than agricultural land/farm
house/plantation property can be acquired by foreign citizen
of Indian Origin provided the purchase consideration is met
either out of inward remittance in foreign exchange through
normal banking channels or out of funds from the purchaser’s
NRE/FCNR accounts maintained with banks in India and a declaration
is submitted to the Central Office of Reserve Bank in Form IPI
7 within a period of 90 days from the date of purchase of the
property/final payment of purchase consideration.

Q10). Can they dispose of such property?

Ans: Yes.

Q11). Can sale proceeds of such property be remitted
out of India?

Ans: Yes. Repatriation of original investment
in respect of properties purchased by foreign citizen of Indian
Origin on or after 26th May 1993 will be allowed to be remitted
up to the consideration amount originally remitted from abroad
provided the property is sold after a period of three years
from the date of the final purchase deed or from the date of
payment of final installment of consideration amount, whichever
is later. Application for the purpose is acquired to be made
to the Central Office of Reserve Bank within 90 days of the
sales of property in Form IPI 8.

Q12). Can the properties (residential/commercial) be
given on rent if not required for immediate use?

Ans: Yes. Reserve Bank has granted general
permission for letting out any immovable property in India.
The rental income or proceeds of any investment of such income
are eligible for repatriation.

Q13). Can authorized dealer grant housing loan to non-residents
of Indian nationality where he is a principal borrower with
his resident close relative as a co-obligator/guarantor or where
the land is owned jointly by such NRI borrower with his resident
close relatives?

Ans: Yes. However, in such cases the payment
of margin money and repayment of the loan installment should
be made by the NRI.

Q14). Can NRIs obtain loans for acquisition of house/flat
for residential purpose from authorized dealers/financial institutions
providing housing finance?

Ans: Reserve Bank has granted general permission
to certain financial institutions providing housing finance
e.g. HDFC, LIC Housing Finance Ltd., etc., and authorized dealers
to grant housing loans to non-resident Indian nationals for
acquisition of a house/flat for self-occupation subject to certain
conditions. The purpose of the loan, margin money and the quantum
of loan will be at par with those applicable to housing loans
to residents. Repayment of loan should be made within a period
not exceeding 15 years out of inward remittance or out of funds
held in the investor’s NRE/FCNR/NRO accounts.

Q15). Can Indian companies grant loans to their NRI staff?

Ans: Reserve Bank permits Indian Firms/Companies
to grant housing loans to their employees deputed abroad and
holding Indian passports subject to certain conditions.

Q16). While purchasing real estate most developers demand
a Power of Attorney in their favor, is there a way to avoid
it?

Ans: One can choose not to grant the Power
of Attorney (POA) to the developers. However this will mandate
the mailing of all documents to your foreign residence and associated
time delays. A good compromise is to grant the POA to the builder
only for specific necessary items.

If you are an NRI or a Property Buyer/Investor you need to understand
your Investment Horizons in Real Estate pretty well.

Term of Investment – This is important as you
need to hold on for at least 1 to 3 Years for a decent capital
appreciation and if you sell your property within 3 years you
are in for a short term capital gains which is at par with the
Income Tax rules of nearly 30 to 35% as applicable. It is better
to stay invested for 3 years and then plan the next investments
with Capital Gains etc.

Pre-Launch offers – Investing in property means
also an entry load by paying stamp duty and registration fees
and other incidental charges to the Builder etc. If you are investing
it is always wise to invest as soon as the project is launched
as this gives you enough time for appreciation as usually the
builder goes in the Stock Market kind of a mode in the first year
of its property by hiking the prices every few months.

Know your Builder – It is imperative to know
your Builder and the project as at the time of your exit the builder
has to be extremely co-operative, the first question to shoot
when you are buying an Under Construction Project is – If I sell
what happens? When can I Sell? Will you charge me some transfer
fees? How the paper work will be done between the Seller, Builder
and the Buyer?

Invest with Deep Thought – The present market
is volatile in Mumbai and it is imperative for you to give a deep
thought on various accounts, which begins from the Project, Infrastructure
available within the Project, Outside the project in the neighborhood,
Selling prospects, Leasing prospects, Neighborhood development,
Distances to Schools, Markets, Malls, Hospitals, Highways, Airports,
Railway stations etc. These should act as your analysis points.

For NRIs – especially before coming to India,
make sure you are carrying most of the relevant papers with you.
You should always have an NRE and an NRO account in India and
if you are looking to invest in Mumbai then one should have an
account in Mumbai for easiness. Review your NRI allowances by
the Government of India every budget etc.

Home Loans – You can set off your EMI’s if
you invest wisely in a property as the rates are presently around
8% and your rental returns are around 4-6%. You can be a happy
man if you do this fool proof homework as your EMI can be hedged
off against the rent receipts to a certain degree.

Re-Sale Properties – In a booming market every
property owner wants to encash his property at the best value.
A few issues which we face is the commitment level of the seller
and we can stumble on to good transactions at times, but this
is more of a time consuming process at times. The repair value,
old building and other property documentation issues can be challenging
in certain transactions.

Returns – It is always advisable to take a
conservative approach in both Capital Appreciation and Rental
returns. However one can safely expect appreciations anywhere
upwards of 15% Per Year and Rental Yields of 4 to 6%.

Commercial and Malls – The opening of new Malls
is surely a good sign but one has to be very careful in investments
in Malls and Commercial real estate. The returns though can be
constant, but for smaller players the Malls and Commercial complexes
can be too hot to handle as the outgoings are pretty steep and
there is a huge difference between the built up and carpet ratio.
It is excellent for self use and business or for a pre-leased
option.

Q17). What are the options available for obtaining guarantors
while applying for a HDFC/LIC loan

Ans: One will need a guarantor for a loan
mainly for collateral security. The guarantor will have to demonstrate
appropriate net worth to cover for the loan. Usually one can
have a guarantor in any city where the loan issuer has a branch.
Talk to loan issuers they will work something out for NRIs and
foreign banks.

Q18). What are the criteria regarding avail of home loans
for NRIs in India?

Ans: According to Reserve Bank guidelines
for NRIs

The loan amount shall not exceed 85% of the cost of the dwelling
unit.

Own contribution, which is the cost of dwelling unit financed
less the loan amount, can be met from direct remittances from
abroad only through normal banking channels, your Non-Resident
(External) [NR (E)] Account and /or Non-Resident (Ordinary)
[NR (O)] account and /or Non-Resident Special Rupee account
[NRSR] in India.

Repayment of the loan, comprising of the principal and interest
including all the charges are to be remitted from abroad only
through normal banking channels, your Non-Resident (External)
[NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account
and /or Non-Resident Special Rupee account [NRSR] in India.

Q19).Can an NRI give a Power of Attorney to a person
in India for completion of loan formalities on their behalf?

Ans: Yes. We very well understand that as
an NRI you have a different set of needs with respect to your
real estate management and investment requirements and we also
understand that it needs special set of services to cater to
your requirements. The good news from India is that government
has allowed 100% repatriation for NRIs.

Reserve Bank has granted general permission to certain financial
institutions providing housing finance e.g. HDFC,LIC Housing Finance
Ltd.,etc. to grant housing loans to non-resident Indian nationals
for acquisition of houses/flats for self-occupation subject to
certain conditions.

Q20). How much loan can one get?

Ans: You can get a Home Loan of up to 85%
of the Total Consideration Value.

Q21). What are the conditions if the power of attorney
is being executed outside India?

Ans: The attorney should preferably be a resident
of India.

The power of attorney should be executed on a stamp paper/plain
paper as the case may be as applicable in the country in which
the power of attorney is executed.

Any authorized official of the Indian Embassy/Consulate/Trade
commissioner in the country where the executants resides should
attest the signature of the executants.

The attorney’s signature should be verified in India by Notary
Public or his employer or his banker on a separate piece of paper,
which should be submitted to SHFL together with the power of attorney.

Photo: Building Construction Mawphanlur Khasi Hills Oct24 A7CR 04333 by Timothy A. Gonsalves, licensed under CC BY-SA 4.0, via Wikimedia Commons.