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TTHHEE LLEEGGIISSLLAATTIIVVEE FFRRAAMMEEWWOORRKK::
The Foreign Exchange Management Act, 1999
(FEMA), which came into force with effct from June 1,
2000, regulates the acquisition and transfer of immovable
properties by non-residents in India. Section 6(3)(i) of the
FEMA, the acquisition and transfer of immovable prop-
erty by non-residents in India are Capital Account
ered under FEMA to frame Regulations to prohibit,
restrict or regulate the acquisition or transfer of immov-
able property in India by a person resident outside India.
However, under its predecessor law-the FERA, the con-
trols was mainly based on the citizenship. Despite the fun-
to regulate such control based on the citizenship also.
However, the restrictions u/s 6(3)(i) are not applica-
ble to a lease of immovable property for a period not
exceeding five years. RBI has framed the Regulations
called The Foreign Exchange Management (Acquisition
and Transfer of Immovable Property in India)
Regulations, 2000 which have been notified vide
Notification No. FEMA 21/2000-RB dated 3rd May,
2000 (“the Regulations”).
◆ Under the predecessor law of FEMA,
the FERA, the control of buying and
selling of property was mainly based on
the citizenship of the individual.
However, under FEMA the restrictions
involving the acquisition and transfer
of immovable property in India are no
more linked to citizenship of the person
but is now generally governed by the
Residential status of a person. This
remarkable departure in the policy is
explained in the article below.
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THE CHARTERED ACCOUNTANT OCTOBER 2003
Can NRIs buy and sell immovable prop-
erty in India under FEMA?-An overview
Sl.No. Regulations Matters Governed
1. It deals with acquisition and transfer of immovable property in India by an Indian cit-
izen resident outside India(NRI)
2. It grants general permission to him to acquire and transfer an immovable property in
India other than agricultural or plantation property or a farm house.
1. It deals with acquisition and transfer of immovable property in India by a Person of
Indian Origin (PIO)
RBI Regulations At a Glance:
*The author is a member of the Institute. The views expressed herein are the personal views of the author and do not
necessarily represent the views of the Institute.
Thus the Reserve Bank of India has given only three
nection with immovable property in India to the follow-
ing categories of Non Residents:
i. a non-resident who is a citizen of India.
iii. a non-resident who has established in India a branch
AACCQQUUIISSIITTIIOONN OOFF PPRROOPPEERRTTYY BBYY AANN IINNDDIIAANN
CCIITTIIZZEENN RREESSIIDDIINNGG OOUUTTSSIIDDEE IINNDDIIAA::
1. No special permission is required for an Indian citi-
zen residing outside India to acquire (by purchase or
gift) any immovable property in India other than
2. However, the restriction on acquiring agricultural
land, plantation or farmhouses is applicable to all
nonresidents. The restriction on ‘agricultural prop-
erties’ continues from the time of FERA. The RBI
does not approve such collectively.
3. Under the old FERA, a declaration had to be filed
giving details of the property. Now this process has
been dispensed with. However the Bank should be
informed about full details of the property and costs
incurred. This can, in a way, help at the time of repa-
triation of sale proceeds of the property.
izens, or who are of Indian origin (referred to as NRI)
allowed to buy immovable properties in India.
5. Further, the non-residents who are Indian citizens
or persons of Indian origin can also acquire any
property (including agricultural properties, etc.) by
way of inheritance. This is because to bequeath a
property is a natural right. It cannot be “given” by a
law. As a corollary, the heir can acquire a property as
inheritance. However once having acquired the
property, restrictions on use or holding can be
imposed under the law. Thus, even if agricultural
property etc. is inherited, the agricultural activities
cannot be conducted. A person may have natural
plants, trees etc. on the land. However, he cannot
grow the same with the intention of earning income.
TTRRAANNSSFFEERR OOFF PPRROOPPEERRTTYY BBYY AANN IINNDDIIAANN
CCIITTIIZZEENN RREESSIIDDIINNGG OOUUTTSSIIDDEE IINNDDIIAA::
1. For an Indian citizen residing outside India, there is no
permission required to transfer (whether by sale or
gift) immovable property in India.
3. If the proposed acquirer is a non-resident (whether
THE CHARTERED ACCOUNTANT OCTOBER 2003431
3. Reg 5
It grants general permission to a person resident outside India who has secured RBI per-
mission to establish a branch, office or other place of business in India (excluding a liai-
son office) to acquire an immovable property in India which is necessry for or incidental
to carrying on the permitted activity.
4. Reg 6
It deals with the repatriation of the sale proceeds by an NRI or a PIO, of an immovable
property (other than agricultural land or plantation property or a farm house) in India
subject to the satisfaction of certain stipulated conditions.
It prohibits the acquistion or transfer of immovable property in India by citizens of cer-
tain neighbouring countries, whether such individual is a resident
of India or not.
It prohibits the transfer of an immovable property in India by a person resident outside
India (other than an NRI or a PIO); i.e., a foreigner, without prior permission of RBI.
Indian citizen or a person of India Origin), the prop-
erty can not be sold. This is a corollary to the restric-
tion on acquiring the agricultural land, etc. (Though
not specified no property- whether agricultural or
otherwise- can be sold to outright foreigners
(nonONR) as they are not allowed to buy property
in India (Reg. 3(b) and 3(c)).
AACCQQUUIISSIITTIIOONN OOFF PPRROOPPEERRTTYY BBYY AA PPIIOO::
1. A person of Indian origin resident outside India does
not require any permission from the RBI to acquire
any immovable property.
2. However he cannot acquire the agricultural land or
plantation property or a farmhouse in India.
3. It is however necessary that the purchase should be
from out of the following funds:
a funds received in India by way of inward remit-
tance through banking channels from any place
outside India, or
b. funds held in any Non Resident Account main-
and the regulations made by the RBI (Reg. 4(a)).
4. A PIO resident outside India does not require any
permission from The RBI to acquire any property in
India other than the agricultural land or plantation
property or a farm house by way of gift.
a. from a person resident in India, or
b. from a person resident outside India who is a cit-
izen of India, or
c. from a person of Indian Origin resident outside
India. (Reg. 4(b)).
5. Further, a PIO resident outside India does not
require any permission from the RBI to acquire any
immovable property in India by way of inheritance.
a. from a person resident outside India who had
acquired such property in accordance with the
provisions of the Foreign Exchange Law in force
of these Regulations or
b. from a person resident in India (Reg. 4(c)).
house or a plantation property, which he cannot nor-
TTRRAANNSSFFEERR OOFF PPRROOPPEERRTTYY BBYY AA PPIIOO::
1. A PIO resident outside India does not require any
permission from the RBI to transfer any immovable
property other than the agricultural land or planta-
tion property or a farm house in India by way of sale
to a person resident in India (Reg.4(d)).
2. A PIO resident outside India can transfer an immov-
able property being agricultural land or plantation
property or a farmhouse in India by way of a gift or
sale to a person resident in India. without any per-
mission from the RBI. Such a transaction is permit-
ted by the Regulation 4(e) provided that the pur-
chaser is a resident as well as a citizen of India.
3. However, a PIO cannot transfer an immovable prop-
erty being agricultural land or plantation property or a
egories of persons without permission from the RBI.
i. A person resident in India who is not a citizen of
ii. A citizen of India who is not a resident in India
iii. A person of Indian origin (PIO)-whether resi-
dent or not.
or commercial property in India by way of a gift. He
can also give a gift of such property to specified per-
erty) the persons to whom a gift can be given are:-
i. to a person resident in India
ii. to a person resident outside India who is a citizen
iii. to another PIO resident outside Inia.
not allowed to acquire property (Regulation 4(f)). For
this purpose, the term “a person of Indian Origin”
(PIO) 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. at any time, held an Indian passport, or
ii. who or either whose father or whose grand father
of India or The Citizenship Act, 1955.
In other words, an individual who is presently a citi-
zen of a foreign country but who at any time held an
Indian passport or who or whose father or grandfather
was a citizen of India, is a person of Indian origin.
However, individuals who are citizens of Pakistan,
Bangladesh, Sri Lanka Afghanistan, China, Iran, Nepal,
Bhutan are excluded from the definition of PIO and
accordingly, they are not entitled to various concessions,
exemptions and benefits which are extended to a PIO
under the various FEMA Regulations.
THE CHARTERED ACCOUNTANT OCTOBER 2003
PPEERRSSOONNSS WWHHOO AARREE AABBSSOOLLUUTTEELLYY PPRROOHHIIBBIITTEEDD
1. All persons, whether resident in India or outside
India, who are citizens of Pakistan, Bangladesh, Sri
Lanka, Afghanistan, China, Iran, Nepal or Bhutan
are prohibited from acquiring or transferring
immovable property in India (other than by way of a
lease, not exceeding five years) without the prior
permission of The Reserve Bank of India. Under
Bank of India for acquiring or transferring any
immovable property in India.
2. The aforesaid regulation is based on whether a per-
son is a resident or a non-resident. If say a person,
who is a citizen of China, comes and takes up
under FEMA. As a resident there are no restrictions
on acquiring immovable property in India.
3. In fact, such a person who has come to India and
taken up employment here can legally acquire agri-
cultural land, farmhouse, etc. Therefore, Regulation
7, which prohibits citizens of certain countries to
acquire immovable property, is ultra vires the Act.
However, it is not the intention of the legislature to
allow the foreign citizens resident in India, to
acquire property in India.
AACCQQUUIISSIITTIIOONN OOFF IIMMMMOOVVAABBLLEE PPRROOPPEERRTTYY BBYY AA
NNOONN--RREESSIIDDEENNTT FFOORR CCAARRRRYYIINNGG OONN AA
1. A person resident outside India who has been per-
mitted by The RBI to establish a branch or an office
or a place of business in India (excluding a Liaison
Office), has a general permission of the RBI to
acquire any immovable property in India who is nec-
2. However, such an acquisition is subject to the due
compliance with all other applicable laws, rules, reg-
ulations or directions for the time being in force.
3. Further, in all such cases, a Declaration in the pre-
scribed Form IPI is required to be filed with The
RBI within 90 days of the acquisition of the immov-
able property (Reg.5(a)).
4. The form IPI is a simple form which requires very
simple and general information such as name and
address of the acquirer, description and full details of
the location, of the property, purpose of acquisition,
5. Further such a person is also permitted to mortgage
such an immovable property to an authorized dealer
as a security for any borrowing (Reg 5(b)).
6. However, such a person requires the prior permis-
sion of The RBI to transfer such a property by way
of a sale or otherwise.
Repatriation of the Sale Proceeds
1. In the case of the sale of an immovable property,
other than an agricultural land/farm house/ planta-
tion property in India by a person resident outside
India, who is a citizen of India, or a person of Indian
origin, the authorised dealer may allow the repatria-
tion of the sale proceeds outside India (including
credit to RFC, NRE or FCNR Accounts), provided
all the following conditions are satisfied.
i. the immovable property was acquired by the
seller in accordance with the provisions of the
Exchange Control Rules/ Regulations/ Law in
force at the time of the acquisition, or the provi-
sions of the Regulations framed under the
Foreign Exchange Management Act, 1999;
ii. the amount to be repatriated does not exceed
a. the amount paid for the acquisition of the
immovable property in foreign exchange
received through normal banking channels or
out of the funds held in foreign currency in a
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 a non-resident
i. in the case of residential property, the repatria-
tion of the sale proceeds is restricted to not
more than two such properties.
2. However, the lock-in period of 3 years prescribed in
condition No.(ii) of Clause (b) of Regulation 6 has
issued directions to the Authorised Dealers vide AP
(DIR series) Circular No. 35 dated 1st November,
2002 to allow the sale proceeds of an immovable
property in India acquired by the NRI/PIO irrespec-
tive of the period for which the property was held.
3. Further The RBI has also now permitted authorized
dealers to allow the facility of repatriation of funds
THE CHARTERED ACCOUNTANT OCTOBER 2003433
THE CHARTERED ACCOUNTANT OCTOBER 2003
by NRI/PIO in their Non-resident Ordinary Rupee
(NRO) Account up to US $ 1,00,000 per year repre-
held by them for a period of not less than 10 years
subject to payment of the applicable taxes.
RREENNTTIINNGG OOUUTT IIMMMMOOVVAABBLLEE PPRROOPPEERRTTYY IINN IINNDDIIAA
The NRIs/PIOs can freely rent out their immovable
property in India without seeking any permission from
The Reserve Bank of India. The rental income being a
current account transaction is freely repatriable outside
India, subject to the payment of the applicable taxes.
AAPPPPLLIICCAABBIILLIITTYY OOFF TTHHEE RREEGGUULLAATTIIOONNSS TTOO NNOONN
1. The restrictions under section 6(3) (i) and the RBI
Regulations are equally applicable to both individuals
2. I we see the definition of “Person” given in section
2(u) which covers various classes of non individuals
and the definition of “person resident in India” given
in section 2(v) and particular reference to clauses (ii)
(iii), (iv) thereof, it is clear that the restrictions u/s
6(3)(i) and the Regulations are also applicable to non-
individual persons, who are resident outside India.
MMAATTTTEERRSS WWHHIICCHH RREEQQUUIIRREE RRBBII’’SS PPRRIIOORR
All transactions involving the acquisition or transfer
of immovable property in India by a person residing out-
side India (as well as by certain persons who are citizens
of certain neighbouring countries) require the prior per-
mission of The Reserve Bank of India unless a general
permission has been granted for such a transaction in
terms of Regulations 3, 4 or 5.
Persons who are required to obtain
Matters which require RBI’s permission
1. Citizen of India residing Outside
India (i.e., NRI)
1. To acquire agricultural or plantation property or a farmhouse in
2. To transfer agricultural or plantation property or a farm house in
India to another NRI or PIO- Reg.3(c)
3. To transfer any immovable property in India to a person resident
2. A person of Indian Origin Resident
outside India (PIO)
1. To acquire any immovable property in India (other than agricul-
tural or plantation property or a farm house) by way of a purchase
from other than foreign exchange funds/Non Resident Accounts.
2. To acquire Agricultural or Plantation Property or a Farm House in
India by way of purchase or gift (other than by way of inheritance)-
Reg. 4(a) & (b)
3. To acquire any immovable property in India (other than the agri-
cultural or Plantation property or a farm house) by way of a gift
from a foreign national resident outside India (other than another
NRI or PIO)- Reg.4(b)
4. To transfer an Agricultural or Plantation property or a Farm House
in India by way of a gift or sale to another NRI or PIO (other than
a person who is a Citizen of India and Resident of India)- Reg.4(e)
5. To transfer any immovable property in India by way of a sale to a
person resident outside India- Reg. 4(d)
of a Gift to a person Resident outside India (other than another
NRI or PIO)- Reg.4(f)
THE CHARTERED ACCOUNTANT OCTOBER 2003435
A person Resident outside who has
been permitted to establish a branch,
office or any other place of business
in India (excluding a liaison office)
To transfer any property in India (other than by way of a mortgage to
an Authorised Dealer as a security for any borrowings)- Reg.5(b)
A foreign national being a citizen of
Pakistan, Bangladesh, Sri Lanka,
Afghanistan, China, Iran, Nepal or
Bhutan (Whether resident in India or
To acquire or transfer any immovable property in India (other than a
lease not exceeding 5 years- Reg.7
Any person resident outside India
foreign national resident outside
RBI permission to acquire an immovable property in India)- Reg 8
Any non Individual Person (i.e., a
company or a firm etc.) resident out-
To acquire or transfer an immovable property in India (other than a
lease not exceeding 5 years.- Reg.6(3)(i)
WWHHOOMM TTOO AAPPPPLLYY FFOORR PPEERRMMIISSSSIIOONN
1. All requests for acquisition of agricultural land/plan-
tation property/farm houses by any person resident
outside India or foreign nationals may be made to The
Chief General Manager, Reserve Bank of India, Central
Office, Exchange Control Department, Foreign
Investment Division (III), Mumbai 400 001 (India)
2. However, no application form has been prescribed
for this purpose.
Thus, unlike the FERA, its successor law- the FEMA
has provided for certain considerable relaxations as far
as the NRIs and PIOs are concerned. Even though
immovable property transactions are considered as
Capital Account Transactions, recent Permission by
The Reserve Bank of India to repatriate the sale pro-
ceeds of an immovable property up to US $ 1,00,000
of the Capital Account Convertibility. Further, the
transactions involving the acquisition and transfer of
immovable property in India are no more highly
restricted under FEMA and these are no more linked
to the citizenship of the person seeking to acquire of
transfer the immovable property. The Acquisition and
Transfer of an immovable property is now generally
governed by the residential status of a person. This is
another remarkable departure in the policy in this
regard under the FEMA Regulations.
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The Institute reserves the right to edit advertisements to conform to
the ethical requirements of the profession.
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