The Foreign Exchange Management Act, 1999 (FEMA), came in force with effect from June 1, 2000. Section 6 (3) (i) of the Act empowers the Reserve Bank to frame regulations to prohibit, restrict or regulate the acquisition or transfer of immovable property in India by certain persons mainly residents outside India. The restrictions under this clause are not applicable to a lease of immovable property for a period not exceeding five years.

The regulations made by the Reserve Bank are called Foreign Exchange management (Acquisition and Transfer of Immovable property in India) Regulations, 2000, and have been notified vide Notification FEMA No. 21/2000-RB of May 3, 2000

A synopsis of the said Regulations is as under:

• All persons, whether resident in India or outside India, who are citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan, require prior permission of Reserve Bank for acquiring or transferring any immovable property in India.
• A person resident outside India, who has been permitted by Reserve Bank to establish a branch, or office, or place of business in India (excluding a Liaison Office), has general permission of Reserve Bank to acquire immovable property in India, which is necessary for, or incidental to, the activity. However, in such cases a declaration, in prescribed form (IPI), is required to be filed with the Reserve Bank, within 90 days of the acquisition of immovable property.
• An Indian citizen resident outside India does not require any permission to acquire any immovable property in India other than agricultural/plantation property or a farm house.
• An Indian citizen resident outside India does not require any permission to transfer any immovable property, to a citizen of India who is resident in India.
• An Indian citizen resident outside India does not require any permission to transfer any immovable property other than agricultural or plantation property or farm house, to a person who: is a citizen of India resident outside India, or is a person of Indian origin resident outside India.
• A person of Indian origin resident outside India does not require any permission to acquire any immovable property other than agricultural land/farm house/plantation property in India by purchase, from out of funds: received in India by way of inward remittance through banking channel from any place outside India, or held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank under the Act.
• A person of Indian origin resident outside India does not require any permission to acquire any immovable property in India other than agricultural land/farm house/plantation property by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India.
• A person of Indian origin resident outside India does not require any permission to 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.
• A person of Indian origin resident outside India does not require any permission to transfer any immovable property in India other than agricultural land/farm house/plantation property, by way of sale to a person resident in India.
• A person of Indian origin resident outside India does not require any permission to transfer agricultural land/farm house/plantation property in India, by way of gift or sale to a person resident in India who is a citizen of India.
• A person of Indian origin resident outside India does not require any permission to 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
• Repatriation outside India, including credit to RFC, NRE or FCNR account, of sale proceeds of any immovable property situated in India, requires prior permission of the Reserve Bank except in circumstances stated in paragraph 13 below.

In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by a person resident outside India, who is a citizen of India, or a person of Indian origin, the authorized dealer may allow repatriation of the sale proceeds outside India, provided all the following conditions are satisfied:

• * 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 acquisition, or the provisions of the Regulations framed under the Foreign Exchange Management Act, 1999.
• * 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 amount paid where such payment was made from the funds held in non-resident external account for acquisition of the property; and
• * In the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties.

Authorized Dealers have been permitted to allow the facility of repatriation offunds by NRIs/PIOs in their Non-Resident Ordinary Rupee (NRO) account upto US$ 100,000per year representing sale proceeds of immovable property held by them for a periodof not less than 10 years subject to payment of applicable taxes

* All requests for acquisition of agricultural land/plantation property/farm houseby any person resident outside India or foreign nationals may be made to The ChiefGeneral Manager, Reserve Bank of India, Central Office, Exchange Control Department,Foreign Investment Division (III), Mumbai 400 001

The NRIs/PIOs can freely rent out their immovable property in India without seeking any permission from the Reserve Bank. The rental income being a current account transaction is freely repatriable outside India.

NOTES:

A. For the purposes of transactions, i.e., transfer, sale, purchase etc., dealing with immovable property in India, a person of Indian origin is defined as under: 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 Indian passport; or

(ii) who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955)

B. For further details please contact the nearest Regional Office of the Reserve Bank of India (Exchange Control Department)

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 Account or out of NRE Account or out of FCNR Account.

As per the recent relaxation RBI has granted General Permission to Non-resident Indians holding Foreign Passport (i.e. Foreign Citizens of Indian Origin) to acquire, hold, transfer or dispose off by way of sale or inheritance of immovable properties situated in India provided :

• The property is for the purchaser's bonafide residential purpose.
• The purchase consideration is met either by remittance of funds from abroad through normal banking channels or out of NRE/FCNR Account or out of FCNR Special Deposit 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 IP 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 in consideration for the property out of those funds.
• Where a Foreign Citizen of Indian origin wishes to acquire a property, out of funds held in NRO Account then the aforesaid general permission from RBI will be required which can be applied for in Form IPI 1.
• 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.
• Non-resident Indians regardless of whether they are holding Indian passport provided they are required for bonafide residential purposes can acquire any number of properties.

The Reserve Bank of India has vide Notification No. FERA/152/93-RB dated 26.05.93 permitted persons of Indian Origin whether holding Indian passport or a Foreign passport (NRI), to repatriate the original investment in equivalent foreign exchange after obtaining prior approval from the Reserve Bank of India.This facility will however be restricted to maximum of two houses.

The above permission allowing repatriation is subject to the following conditions:

• The residential properties are purchased on or after 26.05.1993.
• The residential properties are not transferred or sold for a period of 3 years from the date of the final purchase deed or from the date of payment of final installment, where the agreement for purchase so provides.
• Only the amount of sale proceeds equivalent to the original investment in foreign exchange will be allowed to be repatriated outside India; balance if any, will have to be credited to the NRO Account of the NRI.
• The repatriation is subjected to prior approval from RBI, which is required to be obtained in Form IPI 8, within a period of 90 days of the sale of the property. Form IPI 8 must be accompanied by a copy of the Form IPI 7 submitted earlier at the time of acquisition of the property.

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 repartriable outside India subject to the conditions mentioned on next page.

The Reserve Bank of India on an application in Form IPI I may consider favorably property by Foreign Nationals of Non-Indian origin provided:

• The purchase consideration is met out of funds remitted from abroad.
• The property is acquired for bonafide residential use.
• The Foreign National of Non-Indian origin undertakes not to repatriate the sale proceeds.

Purchase / Sale of Immovable Property in India by Non-Resident Indians Foreigners of Indian Origin and Other Foreigners, etc.

	Residential Purpose	Commercial Purpose	Funds for Investment in Property	Letting out of property	Proceeds Repatriable / Non - repatriable
Non Resident Indian	No RBI Approval required	No RBI Approval required	a) Direct remittance NRO / NRE A/C b) Loans against NRE/ FCNR Deposits for Residential House only	No RBI approval required	Repatriation of Sale Proceeds equivalent to the Original Investment is permitted for a maximum of two houses as well as Commercial Property after 3 years of acquisition (i.e. possession) or payment of last installment, which ever is later, provided the investment is out of direct remittance or NRE/ FCNRaccount Form IPI 8 to be submitted to RBI within 90 days of sale of the property.
Foreign Citizen of Indian origin	No prior RBI approval only intimation to RBI in Form IPI-7 within 90 days of purchase (Press Release dated 8/1/1992)	No RBI approval required Intimation to RBI in Form IPI-7 within 90 days of purchase (08/06/93 Circular)	a) Out of NRE/FCNR A/C or Foreign remittance b) Loans against NRE/ FCNR Deposits for Residential House only c) With prior approval of RBI from NRO Account	No RBI approval required	-Do-
Non Citizen of Foreign origin i.e. Foreigners	RBI approval required (Circular dated 23/3/1992)	RBI approval required	Direct remittance	RBI approval required (Circular dated 23/3/1992)	Non Repatriable
OCB a) Controlled by NRI 60% b) Others	RBI approval required RBI approval required	RBI approval required RBI approval required	Direct remittance Direct remittance	No RBI approval required No RBI approval required	Non Repatriable Non Repatriable
FERA Companies	No RBI approval required (FERA 104/92-RB Dated, 29/1/92)	No RBI approval required	Direct remittance	No RBI approval (Circular Dated 23/3/1992)	Non Repatriable