NRI

Who is NRI?
An Indian Citizen who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad or a person who is not resident in India for a period over 182 days is a non-resident Indian. Persons posted in U.N. organisations and officials deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments are also treated as non-residents.

Who is a person of Indian Origin (PIO)?
A person of Indian origin means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who:

i) held an Indian Passport at any time, or

ii) who or whose father or paternal grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955.

What is an OCB?
Overseas Corporate Bodies (OCBs) are bodies predominantly owned by individuals of Indian nationality or origin resident outside India and include overseas companies, partnership firms, societies and other corporate bodies which are owned, directly or indirectly, to the extent of at least 60% by individuals of Indian nationality or origin resident outside India as also overseas trusts in which at least 60% of the beneficial interest is irrevocably held by such persons.

Such ownership interest should be actually held by them and not in the capacity as nominees. The various facilities granted to NRIs are also available with certain exceptions to OCBs as long as the ownership/beneficial interest held in them by NRIs continue to be at least 60%.

What is Foreign Exchange Management Act (FEMA)?
Residential status and nature of transaction i.e. capital account transaction (e.g. purchase/ sale of shares, property) or current account transaction (e.g. remittance of income on shares, property) are the cornerstones of FEMA. Under FEMA, certain types of transactions do not require RBI permission while others either require prior approval of RBI/ Government or it is mandatory to inform RBI of the same.



Investing in Properties in India

Can NRIs/PIOs invest in real estate in India?
NRI / PIO4 / Foreign National who is a person resident in India (citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of the Reserve Bank) may acquire immovable property in India other than agricultural land/ plantation property or a farm house out of repatriable and / or non-repatriable funds.

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?
They are required to file a declaration in form IPI 7 with the Central Office of RBI 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.

Is there are any Lock in period for such investment?
Currently there is no lock-in period.

Is there a limit to the number of investment in acquiring commercial properties in India?
No, as far as quantity of NRI investment is concerned in real estate investment in India there is no limit on the number of investments.

Does a NRI/PIO, require a company in India or abroad or both for purchasing of property?
No.

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

How should the purchase of residential immovable property be paid for by NRI/ PIO under the general permission?

Payment of purchase price for acquisition of property can be made only through the following:

Funds received by way of inward remittance through normal banking channelsfrom any place outside India or

Funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank.

No payment of purchase price for acquisition of immovable property shall be made either by traveller’s cheque or by foreign currency notes or by other mode other than those specifically permitted as above.



Housing Loan

Can NRIs obtain loans for buying a house/flat for residential purpose from financial institutions providing housing finance&authorized dealer?
Reserve Bank has granted general permission to certain financial institutions providing housing finance 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.

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

Can Indian companies grant loans to their NRI staff?
Reserve Bank permits Indian Firms/Companies to grant housing loans to their employees deputed abroad and holding Indian passports subject to certain conditions.

For what all purposes are housing loans available to NRIs?
NRIs can avail loan for buying or constructing a new home, extending or improving an existing home or even to buy a plot.

Are there any regulation on NRIs taking Housing Loan in India?
The RBI has issued certain guidelines for granting loans to Non-Resident Indians.

1. 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.

2.  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.

These guidelines may change from time to time. It may help to refer to the RBI website.

What is meant by ‘Own Contribution’? How can this ‘Own Contribution’ be paid?
Own Contribution is the cost of the dwelling unit less the loan amount sanctioned. The own contribution should be met from direct remittances from abroad through normal banking channels or from the Non-Resident (External) Account/Non-Resident (Ordinary) or the Non-Resident Special Rupee account in India.

What are the options available for obtaining guarantors while applying for a loan?
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.

What are the common documents to be submitted along with the home loan application?
The following documents are required along with the application form:
Employment/residency related documents (photocopy required):

1. Employment contract (English copy if the contract is not in English, attested by the Embassy/Employer)
2. Latest work permit
3. Details of previous employment
4. Identity card issued by current employer
5. Latest salary certificate (in English) specifying the following:
  • • Name (as it is in the passport)
  • • Date of joining
  • • Passport Number
  • • Designation
  • • Perquisites and salary
6. Pages with valid resident visa stamped on the passport
7. Continuous discharge certificate (CDC) – (for applicants employed in the merchant navy)
8. Overseas Bank Account Statement (four months)

Property Related Documents:
  • • Allotment letter from the co-operative society / association of apartment owners
  • • Receipts for payments made for purchase of the dwelling unit
  • • 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 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

What security will have to be provided?
Typically the security for the loan is first mortgage of the property to be financed, normally by way of deposit of title deeds and/or such other collateral security as may be necessary.In addition interim security may be required, if the property is under construction. Collateral or interim security could be in the form of assignment of life insurance policies, surrender value of which is at least equal to the loan amount, pledge of shares and such other investments.

How can the loan be repaid?
The loan will have to be repaid through Equated Monthly Instalments (EMIs), which includes interest as well as a part of the principal amount. EMI payment starts from the month following the month in which full disbursement takes place. Pre-EMI is calculated at the same rate at which EMI is calculated. EMI payments are to be made through post-dated cheques from Non Resident (External) Account/Non Resident (Ordinary)/Non Resident (Special) Rupee Account (NRSR) in India.

Can an NRI repay loan ahead of schedule?
Yes. An NRI can repay the loan ahead of schedule, by remittances through normal banking channels, Non Resident (Ordinary) / Non Resident (Special) Rupee Account (NRSR), in India.

Can the housing loan of NRI / PIOs be repaid by close relatives of the borrower in India?
Housing Loan in rupees availed of by NRIs/ PIOs from ADs / Housing Financial Institutions in India, can be repaid by the close relatives in India of the borrower.

Selling a property

Can property be sold by NRI without the permission of Reserve Bank?
Yes, RBI 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.

Can a PIO sell residential or commercial property without any prior approval?
A PIO can sell residential or commercial property in India only to a person resident in the country. For transfer to any other person prior approval from the RBI is required.

Can the sale proceeds of such property (if and when sold) be remitted/repatriated out of India?
In respect of such investments, NRIs are eligible to repatriate:
  • • 'The sale proceeds of immovable property in India if the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account.

  • • The amount to be repatriated should notexceed the amount paid for the property in foreign exchange received through normal banking channel or by debit to NRE account (foreign currency equivalent, as on the date of payment) or debit to FCNR (B) account.

  • • In the event of sale of immovable property, other than agricultural land / farm house / plantation property in India, by NRI / PIO, the repatriation of sale proceeds is restricted to not more than two residential properties subject to certain conditions.

  • • If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to USD one million per financial year out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance.

  • • Refund of (a) application / earnest money / purchase consideration made by house-building agencies/seller on account of non-allotment of flats / plots and (b) cancellation of booking/deals for purchase of residential/commercial properties, together with interest, net of taxes, provided original payment is made out of NRE/FCNR (B) account/inward remittances.

Are any conditions required to be fulfilled if repatriation of sale proceeds is desired?
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 instalment of consideration amount, whichever is later.

What is the procedure for seeking such repatriation?
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.

The Rupee loan availed by an NRI for the purchase of residential accommodation was repaid either by inward remittance or by debit to the NRE/FCNR (B) account. Can the sale proceeds of such property be repatriated?
Yes. Loan repayment in foreign exchange is considered equivalent to the foreign exchange received for the purchase of residential accommodation.

At what rates are remittances in foreign currencies made by NRIs converted by banks into rupees?
Such remittances will be converted by banks at the market rate of exchange.

In case of repatriation is there any tax liability to the Indian Government?
Yes, during repatriation, Long Term/Short TermCapital Gain as applicable will have to be paid. The person buying any property from an NRI is liable to deduct TDS before making the payment of the consideration amount to the NRI.

Can an NRI who had acquired immovable property - residential or commercial property, agricultural land, plantation property or a farmhouse - in India while he was a person resident in India continue to hold or transfer such immovable property? In which account should the sale proceeds be credited?
Yes, under the provisions of Section 6 (5) of the Foreign Exchange Management Act, 1999, a PIO who had acquired immovable property in India while he was a person resident in India may continue to hold such property. Under general permission, he may transfer agricultural land, plantation property or a farmhouse in India through sale or gift, to a person resident in India who is a citizen of the country and residential or commercial property in India through sale to a person resident in India and through gift residential or commercial property in India to a person resident in India or to an NRI or a PIO. However, if a PIO is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan, they should seek prior approval of the RBI for the transfer of such immovable property in India. The sale proceeds may be credited to an NRO account.

Can NRI save long-term capital gain tax arising from sale of a residential property in India?
Yes. The same tax-saving schemes, as available to a resident individual, are available to NRIs as to save long-term capital gain tax. However, they will have to obtain a Certificate under Section 197 of Income Tax Act for this purpose, otherwise, the buyer of the property will deduct the TDS before making them payment of the consideration value.

Renting a Property

Can NRI save long-term capital gain tax arising from sale of a residential property in India?
RBI 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. NRI/PIO can rent out the property without approval of Reserve Bank. Rent received can be credited to NRO/NRE account or remitted abroad. Powers have been delegated to the Authorised Dealers to allow repatriation of current income like rent, interest, dividend etc. of NRI/PIO who do not maintain an NRO account in based on an appropriate certification by Chartered Accountant, certifying that the amount proposed to be remitted is eligible for remittance and that applicable taxes have been paid/ provided for.

Inheritance & Gift

Can NRI/ PIO's acquire or dispose residential property by way of gift?
Yes, NRIs and PIOs can freely acquire immovable property in India,other than agricultural land / farm house plantation property, by way of gift either from
1. person resident in India
2. NRI
3. PIO

Again NRIs and PIOs may gift residential/ commercial property to
1. person resident in India
2. NRI
3. PIO
4. Foreign national of non Indian origin - with approval of RBI

Can a person of Indian origin resident outside India gift properties acquired earlier in terms of the provisions of FERA/FEMA?
Yes. A person of Indian origin resident outside India may 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. A Person of Indian origin resident outside India may also transfer by way of gift agriculture land/farm house/plantation property in India to a person resident in India who is a citizen of India.

Can foreign citizen of Indian Origin acquire or dispose of residential property by way of gift?
Yes. RBI has granted general permission to foreign citizen of Indian Origin to acquire or dispose of properties up to 2 houses by way of gift from/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.

Can immovable property held in India, be transferred by way of gift to relatives/registered charitable trusts/organizations in India?
Yes. General permission has been granted by RBI to non-resident persons(foreign citizen) of Indian Origin to transfer by way of gift immovable property held by them in India to relatives & 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.

Can NRIs acquire immovable property by way of gift?
NRI 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. Immovable property, by way of inheritance, can also be acquired by a person of Indian origin resident outside from a person resident in India.

Are NRIs permitted to send remittances outside India out of the assets in India that are inherited by them?
RBI will consider application from NRIs for remittance of assets, inherited by them in India. Such remittance may be permitted up to US$ 100,000 per year.

Can NRIs transfer immovable property in India?
An NRI may transfer any immovable property in India to a person resident in India. NRI 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 resident outside India.

What will the cost of acquisition be in the case of inherited assets at the time of computing capital gains?
In case an asset is acquired through inheritance, the cost of acquisition means the cost at which the previous owner of the property acquired it. This cost will be increased by the cost of any improvement of the assets undertaken by the previous and present owners

Power of Attorney

Can an NRI grant a power of attorney to a resident of India?
An NRI is free to grant Power of Attorney to a Resident. However, such Power of Attorney is restrictive. The Power of Attorney holder can do local operations and give deposit renewal instructions. Power of Attorney Holder cannot instruct to transfer funds abroad. The following conditions should be satisfied when a power of attorney is being executed outside India:
  • • 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.

Can I give a Power of Attorney (PoA) in favour of a person in India to complete loan formalities on my behalf?
Yes. Normally it is usually desirable to appoint a Power of Attorney in India. The Power of Attorney can be given to any person of your choice in India.The Power of Attorney should be executed as per drafts provided by the housing finance companies.

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

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

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.



Disclaimer: The purpose of this FAQ is to provide the NRI visitors a general understanding on the various issues relating to Property investment in India. The above FAQ been prepared on the basis of advice received and may vary from person to person, based on facts of such case. Reasonable efforts have been taken in collecting, preparing and providing quality information, but we do not warrant or guarantee the accuracy, completeness, adequacy or currency of the information. The contents of the FAQs are subject to changes / amendments made by the CBDT / Finance Ministry/ RBI.