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Overview of Foreign Property Ownership
In recent years, foreign property ownership in India has been steadily increasing. India’s rapidly developing economy, diverse culture, and potential for high returns on investment have attracted the attention of international buyers. Buying property in India as NRI can be attributed to various factors such improved infrastructure, relaxed foreign investment policies, and a stable regulatory environment. However, before delving into the intricacies of buying property in India, it is essential to understand the legal landscape that governs property ownership by foreigners.
Understanding the rules and regulations of foreign property ownership is essential for those considering such a venture. It is important to have knowledge about legal considerations and government regulations along with the potential benefits and challenges associated with owning property in a foreign country.
Legal Landscape Governing Property Ownership by Foreigners
Foreign property ownership in India is regulated by the Foreign Exchange Management Act (FEMA) and associated guidelines. FEMA serves as the primary legislation that governs foreign investments and transactions in India. The Reserve Bank of India (RBI) plays a crucial role in monitoring and regulating the transfer and acquisition of immovable property by foreign nationals.
RBI has implemented various measures to facilitate foreign property ownership while ensuring compliance with legal requirements and safeguarding the interests of the country. These regulations outline the eligibility criteria, types of properties that can be purchased, documentation requirements, and procedures involved in the acquisition process. Understanding the legal framework of foreign property ownership is imperative for international buyers who wish to invest in the Indian real estate market.
Eligibility Criteria for Foreigners Looking to Purchase Property in India
Foreigners who wish to buy property in India must meet certain eligibility criteria. Can non-resident buy property in India? Let’s explore the key requirements for foreigners interested in buying property in the country.
Citizenship Requirements
Foreign individuals who wish to make purchase in India must fall into one of the following categories:
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Non-Resident Indians (NRIs):
NRIs are Indian citizens residing abroad. They hold Indian passports and may have acquired foreign citizenship. NRIs are eligible to purchase both residential and commercial properties in India without any restrictions.
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Persons of Indian Origin (PIOs):
PIOs are individuals who or whose ancestors held Indian citizenship and have since acquired the citizenship of other countries. PIOs are also allowed to buy both residential and commercial properties in India.
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Foreign Nationals:
Foreign nationals who are not Indian citizens or PIOs may face certain restrictions and conditions when purchasing property in India.
Residency Status
Apart from citizenship requirements, foreigners interested in buying property in India should also consider their residency status, which is related to the duration and purpose of their stay in the country.
The Following Categories apply:
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Resident Indians:
Resident Indians are Indian citizens who reside in India for a minimum number of days each year. They are not subject to any restrictions when purchasing property in the country.
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Non-Resident Indians & Persons of Indian Origin:
NRIs & PIOs have the same property ownership rights as resident Indians and can freely purchase property in India.
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Foreign Nationals:
Foreign nationals who do not fall under the NRI or PIO categories are subject to certain restrictions. They may need to obtain specific permissions and adhere to additional guidelines and regulations set by the Reserve Bank of India (RBI) or other regulatory authorities.
Types of Properties Foreigners Can Buy in India
Foreigners interested in purchasing property in India can invest in various types of properties. The regulations and guidelines differ depending on the property type. Here are the main categories-
Residential Properties
Foreign individuals, including non-resident Indians (NRIs) and persons of Indian origin (PIOs), can purchase residential properties in India including apartments, villas, townhouses, and residential plots.
Commercial Properties
Foreign entities, including companies and individuals, are eligible to purchase commercial properties in India. The guidelines for purchasing commercial properties may vary depending on the sector and nature of the investment. Approval from the RBI or other regulatory bodies may be necessary in certain cases, depending on the nature and scale of the investment.
Agricultural Land
Foreigners, including NRIs and PIOs, are generally not allowed to directly acquire agricultural land in India. However, there are certain exceptions and provisions for PIOs who have inherited agricultural land or have received it as a gift. In such cases, they are permitted to hold and transfer agricultural land by the regulations specified by the respective state governments.
Action on Property |
Residents |
NRI |
OCI |
| Purchase | Yes | Yes | Yes |
| Sell | Yes | Yes | Yes |
| Receive as a gift from a Resident | Yes | Yes | Yes |
| Gift residential or commercial property | Yes | Yes | Yes |
| Sell Agricultural Land | Yes | No | No |
| Gift Agricultural Land | Yes | No | No |
Specific Restrictions and Guidelines for Foreigners to Buy a Property in India
While foreigners can invest in residential and commercial properties, restrictions and guidelines are in place to regulate foreign property ownership should comply with the regulations prescribed by the RBI, such as obtaining necessary approvals, adhering to payment methods, and fulfilling documentation requirements. It is advisable to engage the services of legal professionals experienced in real estate transactions to ensure a smooth and compliant property acquisition process.
Conditions Applicable to Foreigners to Buy Property in India
I. Restrictions and Regulations on Foreigners’ Property Ownership
The conditions and regulations may vary depending on factors such as the number of properties they can own and the zones where ownership is restricted.
II. Persons of Indian Origin (PIO)
Persons of Indian Origin (PIO) who are foreign nationals but have Indian ancestry or hold Indian passports are eligible to purchase property in India. They are not subjected to any restrictions on the number of properties they can own or specific zones where ownership is limited.
III. Foreigners Residing Outside of India
Foreigners who do not have Indian citizenship and reside outside of India are also eligible to buy property in the country. They need to fulfill some conditions such as having stayed in India for a continuous period of 182 days or more in the previous financial year.
IV. Foreigners Residing in India
Foreigners residing in India, who have obtained valid long-term visas or resident permits, are eligible to purchase property in the country. Similar to foreigners residing outside of India, they need to adhere to certain conditions, such as the intended use of the property for residential purposes only.
V. Foreign Spouse of an NRI/OCI Buying Property in India
Foreign spouses of Non-Resident Indians (NRI) or Overseas Citizens of India (OCI) are permitted to purchase property in India.
Required Documents to Buy Properties in India by NRI
- Title deed (in the name of the seller)
- Building plan sanctioned
- Certificate of commencement
- Certificate of occupancy
- Receipts paid for tax
- Certificate of encumbrance
- Documents of khata / mutation
List of Required Documents at the time of Registration
- PAN Card
- PIO or OCI card
- Passport
- Passport size photographs
- Address proof
Can Foreigners Inherit Property in India?
Inheritance laws in India apply to both Indian citizens and foreigners residing in the country. Here’s a look at who can inherit property in India and the conditions that apply:
Eligibility for Inheritance
In India, the property can be inherited by the following individuals:
- Legal Heirs: The legal heirs, which include spouses, parents, and children of the deceased, have the right to inherit the property.
- Will Beneficiaries: If the deceased individual has left behind a valid will, the beneficiaries named in the will have the right to inherit the property as per the terms specified.
- Succession Laws in India: The succession laws in India are primarily governed by the Indian Succession Act, of 1925. This Act provides guidelines on matters of inheritance, including the distribution of property, the rights of the heirs, and the procedure for administering the estate of the deceased.
- Inheritance Rights of Foreign Individuals: Foreign individuals, including non-resident Indians (NRIs) and persons of Indian origin (PIOs), can inherit property in India. Their inheritance rights are protected under the same laws as Indian citizens.
- Personal Laws and Religion-based Provisions: In addition to the Indian Succession Act, personal laws based on religion also govern property inheritance in India. These personal laws vary depending on an individual’s religious affiliation, such as Hindu, Muslim, Christian, or others. Each religion has specific rules and provisions regarding inheritance, and they may have different requirements and procedures for property succession.
Can Foreigners Sell Property in India?
Selling property as a foreigner in India involves compliance with the Foreign Exchange Management Act (FEMA) regulations and specific state laws. Here are the key points to consider:
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Legal and Regulatory Aspects:
Foreigners selling property in India need to adhere to FEMA regulations, which govern foreign exchange transactions.
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Compliance with FEMA Regulations:
They can repatriate the sale proceeds up to the amount equivalent to the original investment made in foreign currency. Any additional profit or capital gains made can be repatriated subject to applicable taxes.
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State Laws:
Foreigners selling property should be aware of these state-specific laws and comply with the necessary procedures and documentation requirements.
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Restrictions or Guidelines:
There are no specific restrictions or guidelines imposed on foreigners selling property in India.
Documents Required by NRI for Selling Property in India
- Passport as an identity proof
- PAN Card which has the foreign residence number of the applicants
- Tax Returns
- Sale Deed: Legal binding between the buyers and sellers
- Address Proof: Documents in support of addresses in India and abroad have to be provided. These include ration card, telephone bills, electricity bills, life insurance policy statements, aadhar card , etc.
- Documents from the Society: These are required to ensure that the seller has no pending dues .
- Encumbrance Certificate is required to make sure that the property does not have any dues.
Foreigners Buying Property in India for Business Activity
Foreigners looking to conduct business activities in India have various property options available to them. The types of properties they can consider include:
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Commercial Spaces:
Foreigners can purchase commercial spaces such as offices, retail stores, or commercial complexes for establishing their business operations in India. They need to comply with local regulations and obtain any necessary permissions or licenses required for conducting business activities.
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Industrial Properties:
Foreigners interested in setting up manufacturing units or industrial operations can acquire industrial properties. They should comply with applicable laws and regulations related to industrial activities, environmental clearances, and other specific requirements of the industry.
How Can NRIs Buy Property in India? – Procedure
The process of purchasing property in India as a NRI involves several important steps, including documentation, approvals, and registration requirements.
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Research and Property Selection:
NRIs can conduct thorough research for current market trends , including the location, property prices, and legal aspects – post which they can select a property that meets their requirements and budget.
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Obtaining a PAN Card:
A Permanent Account Number (PAN) card, issued by the Income Tax Department of India, is mandatory to conduct property transactions in India.
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Appointing a Legal Advisor:
They will provide expert advice on the legal aspects, verify property documents (such as title deeds, sale agreements, and encumbrance certificates), and provide any other necessary assistance on obtaining all the necessary approvals.
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Financing the Purchase:
Home loans from Indian banks or housing finance companies can be obtained, for which the necessary procedures for loan application, documentation, and approval needs to be followed.
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Registration and Execution:
The sale deed or agreement for the property is executed in the presence of the seller and witnesses. Legal ownership is established after registering the property at the local Sub-Registrar Office within the stipulated time.
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Authorised Dealer’s Role:
These are typically banks authorised by the RBI, and they play a significant role in facilitating property transactions for NRIs. They assist in processing funds for property purchase, repatriation of funds, and ensuring compliance with foreign exchange regulations.
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Government Agencies:
During the property purchase process, various government agencies, such as the local municipal corporation and revenue department, may be involved. Their role includes verifying property records, assessing stamp duty and registration fees, and issuing necessary certificates.
NRI Buying Property in India – Financing Options
Home Loans:
NRIs can avail home loans from Indian banks and financial institutions to finance their property purchases. These loans are offered at competitive interest rates and repayment terms.
Bank Regulations: Indian banks have specific regulations in place for providing home loans to NRIs. These regulations ensure that the loan process is transparent and compliant with legal requirements.
NRIs May Need to Submit Additional Documents Such as
- Passport Copies
- Employment Details
- Income Proof
Foreign Investment Restrictions:
NRIs should be aware of foreign investment restrictions and regulations imposed by the Indian government. These restrictions may include limitations on the number of properties that can be owned, types of properties that can be purchased, and repatriation of funds.
Tax Implications
NRIs and other nationals owning property in India are subject to various tax implications and obligations, which are as follows:
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Property Taxes:
These are based on the market value of the property and vary across different states and cities in India. The property tax rates may differ for residential and commercial properties.
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Capital Gains Tax:
Foreigners selling property in India may be subject to capital gains tax. Tax liability depends on the period for which the property was held before being put on sale. If the holding period is more than 24 months, it’s known as a long-term capital asset, and the gains are subject to long-term capital gains tax. If the property is held for 24 months or less, it is considered a short-term capital asset, and the gains are subject to short-term capital gains tax.
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Repatriation of Funds:
Foreigners are allowed to repatriate funds from the sale of property in India, subject to certain conditions. Repatriation is permitted up to the amount equivalent to the initial investment made to acquire the property. To repatriate the funds, foreign property owners need to provide the necessary documentation, including proof of the property purchase, tax compliance, and permission from the authorised dealer bank.
Outlook and Market Trends
The outlook for foreign property ownership in India is promising, with several positive market trends and government initiatives in place.
The growing economy of India is one of the significant factors contributing to the positive market trends. India has witnessed substantial economic growth in recent years, with a rising middle class and increasing urbanisation . This has led to a surge in the demand for residential and commercial properties, creating a favorable environment for foreign investors.
Indian government has undertaken various initiatives to facilitate foreign property ownership. Real Estate (Regulation and Development) Act, 2016 (RERA) has brought transparency and accountability to the real estate sector, instilling confidence among foreign investors. Additionally, the government has relaxed regulations, making it easier for foreigners to invest in Indian real estate.
The “Make in India” campaign launched by the Indian government aims to boost foreign direct investment (FDI) in the country, including the real estate sector. This has promoted India as a global manufacturing and investment destination.
Furthermore, the government has eased foreign direct investment norms for the real estate industries, allowing 100% FDI under the automatic route. This has encouraged foreign investors to participate in the development of real estate projects across India. The introduction of the Goods and Services Tax (GST) has streamlined the taxation system and eliminated multiple indirect taxes, making the process more transparent and investor friendly.
Also Read:
NRI Investment in Indian Real Estate
10 Best Cities for Real Estate Investment in India
Final Thoughts
In conclusion, the question of whether foreigners can buy property in India presents both opportunities and challenges. On one hand, India has relaxed its regulations in recent years, allowing foreign nationals to acquire property in the country. This presents a significant opportunity for NRIs who wish to invest in India’s real estate market or establish a second home in this vibrant nation. The availability of diverse property options and the potential for high returns make India an attractive destination for foreign investors.
However, it is crucial to acknowledge the challenges that foreigners may encounter when buying property in India. The intricacies of legal procedures, varying state-specific regulations, and potential cultural and language barriers can pose obstacles. Prospective buyers need to seek the guidance of legal experts well-versed in Indian real estate laws and regulations.
FAQ’s
1. Can US citizens buy property in India?
Yes, a US citizen can purchase property in India. As per the regulations set by the RBI and FEMA, they are eligible to buy immovable property in India which includes residential and commercial properties.
2. Can you buy land in India without citizenship?
Yes, it is possible to buy land in India without being a citizen under certain conditions and specific circumstances. The acquisition of land by foreigners is regulated by RBI and FEMA.
3. Can an English person buy property in India?
Yes, an English person can buy property in India. Foreign nationals, including from England and other countries are eligible to buy properties in India subject to compliance with the regulation set forth by FEMA and RBI.
4. Can UK citizens buy property in India?
Yes, UK citizens can purchase property in India. FEMA and RBI allow foreign citizens including UK nationals to buy immovable property in India. However, there are conditions and certain guidelines which need to be followed such as getting the necessary permission and adhering to any limitations imposed by Indian authorities.
5. Can an NRI buy property in India without an Aadhar card?
Yes, it is not necessary for property purchase by NRIs. They can use their passport as a valid identification document for the transaction.
6. Can NRI sell property in India without coming to India?
Yes, they can sell without coming to India by appointing a trusted power of attorney to handle the sale on their behalf. The power of attorney can execute the necessary legal and financial procedures for the property sale without the NRI being present in India.
7. Can an NRI sell his property in India?
Yes, NRIs can sell their property in India as they have the same rights as resident Indians when it comes to selling property. They can appoint a representative on their behalf as power of attorney.
8. Can a foreigner buy property in Goa?
Yes, foreigners are allowed to buy property in Goa under certain regulations. It is important to follow certain guidelines set by RBI for purchasing residential, commercial, apartments, houses, or any land.
