Foreign Investments in India - Acquisition of Immovable Property
A.P. (DIR Series) (2003-2004) Circular No. 43 dated 8-12-2003
Attention of
Authorised Dealers is invited to the Foreign Exchange Management (Acquisition
and transfer of immovable property in India) Regulations, 2000 notified by the
Reserve Bank of India vide Notification No. FEMA.21/2000-RB dated May 3, 2000
as amended from time to time giving effect to the provisions of the Foreign
Exchange Management Act (FEMA), 1999 relating to acquisition and transfer of
immovable property by foreign companies/persons resident outside India.
2. The Reserve Bank has issued
Notification No. FEMA.93/2003-RB dated June 9, 2003 covering further modifications
and measures for liberalisation with regard to acquisition of immovable
property (copy enclosed). The updated instructions are summarised in the
Annexure for ready reference.
3. Authorised Dealers may bring the
contents of this circular to the notice of their constituents concerned.
4. The directions contained in this
circular have been issued under Sections 10(4) and 11(1) of the Foreign
Exchange Management Act, 1999 (42 of 1999)
Annexure
Foreign
Investments in India – A summary of updated instructions regarding acquisition
of immovable property
1. Acquisition and Transfer of Immovable
Property in India
(i) Acquisition by a person resident
outside India - A person resident outside India who is a citizen of India can
acquire any immovable property in India other than agricultural/plantation/farm
house.
(ii) Acquisition by way of transfer - A
person resident outside India may transfer any immovable property other than
agricultural or plantation property or farm house to a person resident outside
India who is a citizen of India or to a person of Indian origin (PIO) resident
outside India or a person resident in India. He may however transfer
agricultural land/plantation property/farm house only to Indian citizens
permanently residing in India. A PIO can transfer any immovable property in India
other than agricultural land/farm house/plantation property by way of sale to a
person resident in India and agricultural land/plantation/farm house by way of
gift or sale to only an Indian citizen permanently residing in India. He may
also transfer residential or commercial property in India by way of gift to a
person resident in India or to a person resident outside India who is a citizen
of India or to a person of Indian origin resident outside India.
(iii) Acquisition by way of Gift - A PIO
resident outside India can acquire any immovable property other than
agricultural land/farm house/plantation property in India by purchase or by way
of gift and any immovable property by way of inheritance. For acquiring the
property, the funds should come from abroad or by debit to any non-resident
account, viz., NRE/FCNR/NRO account of the investor. The gift can be received
from a person resident in India or from a person resident outside India who is
a citizen of India or from a PIO resident outside India.
(iv) Acquisition by way of inheritance - The
immovable property can be acquired by PIO by way of inheritance from a person
resident in India or a person resident outside India provided he has in turn
acquired such property in accordance with Foreign Exchange Law/Regulations in
force at the time of acquisition.
2. Purchase/Sale of
immovable Property by Foreign Embassies/Diplomats/Consulate Generals
Foreign
Embassy/Diplomat/Consulate General has been allowed to purchase/sell immovable
property in India other than agricultural land/plantation property/farm house
provided (i) clearance from Government of India, Ministry of External Affairs
is obtained for such purchase/sale, and (ii) the consideration for acquisition
of immovable property in India is paid out of funds remitted from abroad
through banking channel.
3. Acquisition of Immovable Property for
carrying on a permitted activity
A person
resident outside India who has a branch, office or other place of business
(excluding a liaison office) for carrying on his business activity with
requisite approvals in India may acquire an immovable property in India which
is necessary for or incidental to carrying on such activity provided that all
applicable laws, rules, regulations or directions for the time being in force
are duly complied with. The entity/concerned person would have to file a
declaration in form IPI with the Reserve Bank, within ninety days from the date
of such acquisition. The non-resident is eligible to transfer by way of
mortgage the said immovable property to an Authorised Dealer as a security for
any borrowing.
4. Repatriation of sale proceeds.
In the event of
sale of immovable property other than agricultural land/farm house/plantation
property in India, Authorised Dealer may allow repatriation of sale proceeds
outside India provided;
(i) the immovable property was acquired by
the seller in accordance with the provisions of the Foreign Exchange Law in
force at the time of acquisition by him or the provisions of FEMA Regulations;
(ii) the amount to be repatriated does not
exceed (a) 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 or (b) 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.
(iii) In the case of residential property, the
repatriation of sale proceeds is restricted to not more than two such
properties.
(iv) Authorised Dealers may allow to NRIs/PIOs
the facility of repatriation of funds out of balances held in their
Non-resident Rupee (NRO) Accounts upto USD one million per calendar year,
including sale proceeds of immovable property, subject to production of an
undertaking by the remitter and a certificate by a Chartered Accountant in the
formats prescribed by the Central Board of Direct Taxes (CBDT) (enclosed to
A.P. (DIR Series) Circular No. 56 dated November 26, 2002).
5. Prohibition on
acquisition or transfer of immovable property in India by citizens of certain
countries.
No person being a citizen of Pakistan, Bangladesh, Sri Lanka,
Afghanistan, China, Iran, Nepal or Bhutan shall acquire or transfer immovable
property in India, other than on lease, not exceeding five years, without prior
permission of the Reserve Bank.
Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India)(Amendment) Regulations, 2003
In exercise of
the powers conferred by clause (i) of sub-section (3) of Section 6, sub-section
(2) of Section 47 of the Foreign Exchange Management Act, 1999 (42 of 1999) and
in partial modification of its Notification No. FEMA 21/2000-RB dated May 3,
2000, the Reserve Bank of India makes the following amendments in the Foreign
Exchange Management (Acquisition and Transfer of Immovable Property in India)
Regulations 2000, namely :-
Short title and Commencement :
(i) These Regulations may
be called the Foreign Exchange Management (Acquisition and Transfer of
Immovable Property in India) (Amendment) Regulations, 2003.
(ii) They shall come into force on the date of
their publication in the Official Gazette.
In the Foreign
Exchange Management (Acquisition and Transfer of Immovable Property in India)
Regulations 2000, after Regulation 5, the following Regulation shall be
inserted namely :
“5A.
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 (i)
clearance from Government of India, Ministry of External Affairs is obtained
for such purchase/sale, and (ii) the consideration for acquisition of immovable
property in India is paid out of funds remitted from abroad through banking
channel”.