• Non-resident Indians holding Indian passport do not require any permission from RBI for acquiring immovable property for bonafide residential purposes as section 31 of FERA 1973 is not applicable to them.
  • Non-resident Indians holding Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO/ NRE/ FCNR account.
  • Foreign citizens of Indian origin are however required to declare the properties to RBI within a period of 90 days from the date of purchase in Form IPI 17. The following documents must be submitted along with the declaration. - A certified copy of the purchase deed or a certificate from the Co-operative Housing Society or an Association of the apartment owners as an evidence of transfer / registration of the property in the declarant's name. - Certificate from the declarant's bankers in India evidencing receipt of inward remittance(s) in foreign exchange through normal banking channel or withdrawal of funds from the declarant's NRE/FCNR account/ FCNR Special Deposit Account and payment of consideration for the property out of those funds.
  • Where a Foreign Citizen of Indian origin wishes to acquire a property from the sale proceeds of another property, prior permission of RBI is essential and may be obtained by applying in Form IPI 1.
  • Any number of properties can be acquired by non-resident Indians regardless of whether they are holding Indian passport provided they are required for bonafide residential purposes.
  • Under Section 29 of the Foreign Exchange Regulation Act 1973, the Reserve Bank of India has granted General Permission to Foreign Citizens of Indian origin and Indian citizens residing outside India to let out their immovable properties (Commercial / Residential). The rental income or proceeds of any investments out of such income shall be repatriable outside India subject to Income tax being paid.

The Non-Resident Indians (NRIs) are recognized under the Foreign Exchange Regulatory Act, 1973. Every bank and housing finance companies follow the RBI guidelines to define NRI - "An Indian citizen who holds a valid documents like Indian passport and who stays abroad for employment or for carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a NRI."

BROADLY CATEGORIZED, NON-RESIDENT INDIANS QUALIFYING FOR NRI HOUSING LOANS ARE:
  • Indian citizens who stay abroad for employment or for carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad;
  • Government servants who are posted abroad on duty with the Indian missions and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources;
  • Government servants deputed abroad on assignments with foreign Governments or regional/international agencies like the World Bank, International Monetary Fund (IMF), World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP);
  • Officials of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

Documents required for Resident Indians as well as for NRIs for getting Home Loans are different in some respect. Home loans for NRIs are available for construction of new house / flats, purchase of old house / flat addition / alteration to an existing house and repairs / renovation etc. NRIs can avail of loans by mortgaging an existing residential property. However, for availing home loans, NRIs have to fulfil certain conditions according to provisions of the Income Tax Act. They should have stayed in India for a period of 182 days or more within an assessment year or they should have stayed in India for at least a total of one year or more.

The FDI Policy that permits FDI up to 100% from foreign/NRI investor under the automatic route has boosted NRI confidence. Banks have attractive NRI housing schemes to accommodate the housing needs of NRIs. From the stables of HFCs, NRI housing finance plans with suitable repayment options are available. Last but not the least, NRIs should take due care while selecting their home loan provider companies or HFCs. Considering the geographical distances involved, it is significant that loan seekers associate with a proactive and responsive HFC.

The eligibility criteria of NRIs differ from Resident Indians based on a few parameters. The parameters include:

  • Age: The loan applicant has to be 21 years of age.
  • Qualification: The NRI loan seeker has to be a graduate.
  • Income: The loan applicant has to have a minimum monthly income of $ 2,000 (although, this criterion may differ across HFCs).The eligibility is also determined by the stability and continuity of your employment or business.
  • Payment options: The NRI also has to route his EMI (Equated Monthly Instalments) cheques through his NRE/NRO account. He cannot make payments from another source say, his savings account in India.
  • Number of dependants: The eligibility of the applicant is also determined by the number of dependents, assets and liabilities.

An NRI applicant is eligible to get a home loan ranging from a minimum of Rs 5 lakhs to a maximum of Rs 1 crore, based on the repayment capacity and the cost of the property, which although is variable by the priorities of the home loan provider. Also Home Loan Tenure for NRIs is different from Resident Indians. An applicant will be eligible for a maximum of 85% of the cost of the property or the cost of construction as applicable and 75% of the cost of land in case of purchase of land, based on the repayment capacity of the borrower. However, a NRI can enhance his loan eligibility by applying for home loans with a co-applicant who has a separate source of income. Also, the rate of interest for home loans to NRIs is higher than those offered to Resident Indians. The difference is to the extent of 0.25%-0.50%. Some HFCs also have an internally earmarked 'negative criterion' for NRI home loans. As such, the NRIs who hail from locations that are marked as being 'negative' in the books of HFCs, find it difficult to get a home loan.

The Reserve Bank of India (RBI) has clarified that Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO), purchasing immovable property in India should pay for the acquisition by funds received in India through normal banking channels by way of inward remittance from outside the country.

The NRIs and Resident Indians can also acquire immovable property in India other than agricultural property, plantation or a farmhouse. It has issued certain directive for sanctioning home loans to Non-Resident Indians. The guidelines provided are:

  • The home loan amount should not exceed 85% of the cost of the dwelling unit, as the remaining amount that is 15% needs to be provided an own contribution towards the cost of unit financed.
  • The cost of dwelling unit which is own contribution financed less the loan amount, can be met from direct remittances from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.
  • However, repayment of the loan, comprising of the principal and interest including all the charges are to be remitted to the HFC from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India.
  • The repayment option for NRIs as they can pay through the funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999, and the regulations made by the RBI from time to time. As most of the home loan provider companies consider the economical stability of the applicant, home loans for NRIs are quite feasible, because they are well in economic resource.

The documentation required to be submitted by the NRIs are different from the Resident Indians as they are required to submit additional documents, like copy of the passport and a copy of the works contract, etc. And of course NRIs have to follow certain eligibility criteria in order to get Home Loans in India. Another vital document required while processing an NRI home loan is the power of attorney (POA). The POA is important because, since the borrower is not based in India; the HFC would need a 'representative' 'in lieu of' the NRI to deal with and if needed. Although not obligatory, the POA is usually drawn on the NRI's parents/wife/children.

The documents needed for obtaining NRI home loans are:

  • Passport and Visa
  • A copy of the appointment letter and contract from the company employing the applicant.
  • The labor card/identity card (translated in English and countersigned by the consulate) if the person is employed in the Middle East Salary certificate (in English) specifying name, date of joining, designation and salary details.
  • Bank Statements for the last six months

List of Classified documents for Salaried and Self Employed NRI Applicants:

Salaried NRI Applicants Self-Employed NRI Applicants
Copy of valid passport showing VISA stamps Passport copy with valid visa stamp
Copy of valid visa / work permit / equivalent document supporting the NRI status of the proposed account holder Brief profile of the applicant and business/ Trade license or equivalent document
Overseas Bank A/C for the last 3 months showing salary credits 6 months overseas bank account statement and NRE/ NRO account
Latest contract copy evidencing Salary / Salary Certificate / Wage Slips Computation of income, P&L account and B/Sheet for
last 3 years certified by the C.A. / CPA or any other relevant authority as the case may be (or equivalent company accounts)

Property Documents:

  • Original title deeds tracing the title of the property for a minimum period of the last 13 years.
  • Encumbrance Certificate for the last 13 years.
  • Agreement of sale /construction, if any
  • Receipts for payments made for purchase of the dwelling unit.
  • Approved plan / license.
  • ULC clearance /conversion order etc.
  • Receipts for having invested the margin money through normal banking channels from the Non-Resident (External) account in India and / or the Non-Resident (Ordinary) account in India.
  • Latest tax paid receipt
  • Allotment letter from the co-operative society / association of apartment owners.
  • Agreement for sale / sale deed /detailed cost estimate from Architect / Engineer for property to be purchased / constructed /extended / improved.
  • Copy of approved drawings of proposed construction/purchase/extension.
  • Additional documents to be submitted by Person of Indian Origin
  • Photocopy of PIO card.
  • If the PIO card is not available, photocopies of any of the following documents:
  • The current passport, with birthplace as 'INDIA'
  • The Indian passport, if held by the individual earlier.
  • Parents/grandparents Indian passport/birth certificate/marriage certificate substantiating the individuals claim as a person of Indian origin.

Are Non-Resident Indians (NRIs) allowed to purchase a Residential Property in India?
Non-Resident Indian’s and People of Indian Origin with Foreign Passport Holder can purchase of residential property in India. They are treated wholly as Indian Citizens and therefore don’t require permission to purchase from the Reserve Bank of India.

How do you define a foreign passport holder but of an Indian origin?
A foreign passport holder is deemed to be of Indian Origin if: 1) he held an Indian Passport at any time or ii) he or his father or paternal grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955. However this does not apply to citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka or Nepal.

How should the purchase of residential immovable property be paid for by NRI’s under the general permission?
The purchase consideration should be met either out of inward remittance in foreign exchange through normal banking channels, or out of funds from NRE/FCNR accounts maintained with banks in India.

Do you have to inform Reserve Bank of India when selling property?
Yes. Reserve Bank has granted general permission for sale of such property. However, where the property is purchased by another NRI, funds towards the purchase consideration should either be remitted to India or paid out of balances in NRE/FCNR accounts.

What formalities have to be completed by NRI’s to purchase residential immovable property in India under the general permission?
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 (Sale Deed) or final payment of purchase consideration along with a certified copy of the documentary evidence for the transaction and bank certificate for the money paid.

What are the Tax Implications on eventual sale of the property by an NRI? Can an NRI take the net amount outside India in sterling or dollars after tax has been paid?
On an eventual sale of property, there will be tax implication on profit gain in case of individual. Individual will be charged upto 30% tax on the gain. Also in case of short term gain, the charge will be taxed at 30% if within three years. And above 3 years i.e. Long Term gain will be taxed at much lesser rate i.e. approx. 15%.The Net amount, after deducting the necessary taxes and charges, can be taken back in any currency outside India .

How do we ascertain the credibility of the Builder and the Project?
It is essential that you may know the background of the Builder? Since there are already existing projects, it will be easy to understand the working of the concerned builder. If earlier Projects have been completed in time & possession of the Apartments, especially those sold to NRI’s. Reference can be made and enquiry sought with such owners of apartments about their satisfaction with regards to their stay, maintenance and overall project work.

What would be the total cost of purchasing the Apartment/Villa?
The price will differ depending on the size, location and view of the Apartment, so only on enquiry one will know the exact price at the stipulated time, besides the cost of the apartment, there will be other incidental costs such as Maintenance charges, Registration charges, Local Taxes as applicable, etc. Details will be provided on request.

What is the role of the Agent? And what would be his fees?
All Agents will see you through the entire Sales Process and will be responsible from the initial contact to the final stage that is receiving your keys to the Apartment. For all this he will be paid or will charge a fee at a percentage of the basic price depending on the work load undertaken.

What are the legal steps before pursuing the Purchase?
Besides being impressed with the work of the Builder, the Purchaser must check all the title documents of the said property that the Builder is the sole owner of the same. Ensure that the Construction plans have been approved by the concerned authorities and that the all necessary Government Approvals have been obtained to build and sell the same.

What other expenses will I incur?
The Purchaser has to bear the expenses pertaining to Registration and Stamp Duty of the Apartment. There may be additional Government Taxes as applicable, such as Service Tax, any deposit in the name of the Purchaser or any other.

Is the price of the Apartment likely to increase?
The price as quoted may increase periodically depending on the market by 7.5% to 10% at the discretion of the Builder. Thus, the earlier you book the Apartment the better rate you will receive.

On or after booking/purchasing an Apartment, whether there will be any price variation on escalation?
No, the price quoted for an apartment, at the time of booking/purchasing will not change on escalation.

Can NRI’s obtain loans for acquisition of a house/flat for residential purpose from financial institutions providing housing finance?
The Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, ICICI, SBI and various other Banks 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. Details will be provided upon request.

If I require more specific details regarding Reserve Bank of India ?
Please go to: www.rbi.org.in for the website of Reserve Bank of India , click on FAQ then again on Foreign Exchange under “ Jan. 01, 2006 , Acquisition and Transfer of Immovable Property in India by a person resident outside India ”. This site gives a detailed account for all types of Foreign Nationals purchasing Residential Properties in India.

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