Acquisition and Transfer of Immovable Property under Foreign
Exchange Management Act, 1999
(Last updated 1st September 2022)
Part I – Acquisition and Transfer of Immovable Property outside India by a
person resident in India
1. Introduction
1.1 The FEMA 1999 empowers the Central Government to prescribe, in consultation with the RBI, rules pertaining to capital account transactions, not involving debt instruments. The Central Government has, accordingly, notified the Foreign Exchange Management (Non-debt Instruments) Rules, 2019, dated October 17, 2019, as amended from time to time, in supersession of the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018. These Rules do not apply to acquisition or transfer of immovable property in India by a person resident outside India on a lease not exceeding five years.
1.2 As per section 6(5) of FEMA, a person resident outside India can hold, own, transfer or invest in any immovable property situated in India if such property was acquired, held or owned by him/ her when he/ she was resident in India or inherited from a person resident in India.
2. Definitions
Some key terms used in the Rules are given below:
2.1 A ‘Non-Resident Indian’ (NRI) is a person resident outside India who is a citizen of India.
2.2 An ‘Overseas Citizen of India (OCI)’ is a person resident outside India who is registered as an Overseas Citizen of India Cardholder under Section 7(A) of the Citizenship Act, 1955.
2.3 ‘Repatriation outside India’ means the buying or drawing of foreign exchange from an authorised dealer in India and remitting it outside India through banking channels or crediting it to an account denominated in foreign currency or to an account in Indian currency maintained with an authorised dealer from which it can be converted in foreign currency.
2.4 ‘Transfer’ includes sale, purchase, mortgage, exchange, pledge, gift, loan or any other form of transfer of right, title, possession or lien.
2.5 ‘Relative’ means relative as defined in section 2(77) of the Companies Act, 2013.
3. Acquisition/ transfer by a Non- Resident Indian (NRI)
3.1 Acquisition of immovable property
3.1.1 An NRI or an OCI can acquire by way of purchase any immovable property (other than agricultural land/ plantation property/ farm house) in India.
3.1.2 An NRI or an OCI can acquire by way of gift any immovable property (other than agricultural land/ plantation property/ farm house) in India from person resident in India or from an NRI or an OCI who is a relative as defined in section 2(77) of the Companies Act, 2013.
3.1.3 An NRI or an OCI can acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired the property in accordance with the provisions of the foreign exchange law in force at the time of acquisition.
3.1.4 An NRI or an OCI can acquire any immovable property in India by way of inheritance from a person resident in India
3.2 Transfer of immovable property
- An NRI or an OCI may transfer any immovable property in India to a person resident in India;
- An NRI or an OCI may transfer any immovable property (other than agricultural land or plantation property or farmhouse) to an NRI or an OCI. In case the transfer is by way of gift, the transferee should be a relative as defined in section 2(77) of the Companies Act, 2013.
3.3 Payment for Acquisition of Immovable Property
- NRIs or OCIs may make payment, if any, for transfer of immovable property out of funds received in India through banking channels by way of inward remittance from any place outside India or by debit to their NRE/ FCNR (B)/ NRO account;
- Such payments cannot be made either by traveller’s cheque or by foreign currency notes or by other mode except those specifically mentioned above.
4. Joint acquisition by the spouse of an NRI or an OCI
4.1 A person resident outside India, not being a Non-Resident Indian or an Overseas Citizen of India, who is a spouse of a Non-Resident Indian or an Overseas Citizen of India may acquire one immovable property (other than agricultural land/ farm house/ plantation property), jointly with his/ her NRI/ OCI spouse.
4.2 Consideration for transfers made under this para should be out of funds received in India through banking channels by way of inward remittance from any place outside India or by debit to non-resident account of the person concerned maintained in accordance with the Act or the rules framed thereunder. Payments cannot be made either by traveller’s cheque or by foreign currency notes or by other mode except those specifically mentioned in this para.
4.3 The marriage should have been registered and subsisted for a continuous period of not less than two years immediately preceding the acquisition of such property.
4.4 The non-resident spouse should not otherwise be prohibited from such acquisition.
5. Acquisition by a Long-Term Visa holder
5.1 A person being a citizen of Afghanistan, Bangladesh or Pakistan belonging to minority communities in those countries viz., Hindus, Sikhs, Jains, Buddhists, Parsis and Christians, who is residing in India and has been granted a Long-Term Visa (LTV) by the Central Government may purchase only one residential immovable property in India as dwelling unit for self-occupation and only one immovable property for self-employment.
5.2 The property should not be located in and around restricted/ protected areas so notified by the Central Government and cantonment areas.
5.3 The person should submit a declaration to the Revenue Authority of the district where the property is located specifying the source of funds and that he/ she is residing in India on a LTV.
5.4 The registration documents of the property should mention the nationality and the fact that such person is on a LTV.
5.5 The property of such person may be attached/ confiscated in the event of his/ her indulgence in anti-India activities.
5.6 A copy of the documents of the purchased property shall be submitted to the Deputy Commissioner of Police (DCP)/ Foreigners Registration Office (FRO)/ Foreigners Regional Registration Office (FRRO) concerned and to the Ministry of Home Affairs (Foreigners Division).
5.7 Sale of the immovable property so acquired is permissible only after such person has acquired Indian citizenship. However, transfer of such immovable property before acquiring Indian citizenship requires the prior approval of the Deputy Commissioner of Police (DCP)/ Foreigners Registration Office (FRO)/ Foreigners Regional Registration Office (FRRO) concerned.
6. Acquisition of immovable Property by Foreign Embassies/ Diplomats/ Consulate Generals
Foreign Embassy/ Diplomat/ Consulate General, may purchase/ sell immovable property (other than agricultural land/ plantation property/ farm house) in India provided –
- Clearance from the Government of India, Ministry of External Affairs is obtained for such purchase/sale, and
- The consideration for acquisition of immovable property in India is paid out of funds remitted from abroad through the normal banking channels.
7. Acquisition of immovable property by person resident outside India for carrying on a permitted activity
7.1 A branch or office or any other place of business in India, other than a liaison office, established by a person resident outside India, may acquire immovable property in India which is necessary for or incidental to the activity carried on in India by such branch or office.
7.2 Such a person is required to file with the Reserve Bank a declaration in the form IPI (as given in the Master Direction on Reporting), not later than ninety days from the date of such acquisition.
7.3 The immovable property so acquired can be mortgaged to an Authorised Dealer as a security for any borrowing.
7.4 However, acquisition of immovable property in India by a branch, office or other place of business of persons of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Hong Kong or Macau or Nepal or Bhutan or Democratic People’s Republic of Korea origin/ nationality/ ownership requires the prior approval of the Reserve Bank.
8. Repatriation of sale proceeds of immovable property
8.1 A person acquiring property in accordance with section 6(5) of FEMA (reference para 1.2 of Part II) or his successor cannot repatriate outside India the sale proceeds of such immovable property without the prior permission of the Reserve Bank. However, if such a person is resident outside India, he/ she can utilise the remittance facilities available under the Foreign Exchange Management (Remittance of Assets) Regulations, 2016, as amended from time to time.
8.2 In the event of sale of immovable property other than agricultural land/ farm house/ plantation property in India by a PIO resident outside India [who held property in India in terms of the erstwhile FEM (Acquisition and transfer of Immovable Property in India) Regulations, 2000] or an NRI or an OCI, the Authorised Dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:
- the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him;
- the amount for acquisition of the immovable property was paid in foreign exchange received through banking channels or out of funds held in FCNR(B) account or NRE account;In case an immovable property in India has been purchased by a PIO resident outside India [who held property in India in terms of the erstwhile FEM (Acquisition and transfer of Immovable Property in India) Regulations, 2000] or an NRI or a OCI out of housing loans availed in terms of Foreign Exchange Management (Borrowing and lending in rupees) Regulations, 2000, as amended from time to time, and the repayments for such loans are made out of remittances received from abroad through banking channels or by debit to the NRE/ FCNR(B) account of such person, such repayments may be treated as equivalent to foreign exchange received.
- in the case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties
8.3 In the event of failure in repayment of external commercial borrowing availed by a person resident in India under the provisions of the Foreign Exchange Management (Borrowing or Lending in Foreign Exchange) Regulations, 2000, as amended from time to time, a bank which is an authorised dealer may permit the overseas lender or the security trustee (in whose favour the charge on immovable property has been created to secure the ECB) to sell the immovable property on which the said loan has been secured only to a (by the) person resident in India and to repatriate the sale proceeds towards outstanding dues in respect of the said loan and not any other loan.
9. Prohibition on acquisition or transfer of immovable property in India by citizens of certain countries
9.1 Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong and Democratic People’s Republic of Korea cannot, without prior permission of the Reserve Bank, acquire or transfer immovable property in India, other than on lease, not exceeding five years. For this purpose the term “citizen” shall include natural persons and legal entities.
9.2 The prohibition at 9.1 above shall not apply to an OCI.
10. Miscellaneous
10.1 Authorized Dealer Category-I banks may convey no objection for creation of charge on immovable assets of a person resident in India either in favour of the external commercial borrowing (ECB) lender or the security trustee subject to the following conditions:
- ‘No objection’ shall be granted only to a resident ECB borrower;
- The period of such charge on immovable assets has to be co-terminus with the maturity of the underlying ECB;
- Such ‘no objection’ should not be construed as a permission to acquire immovable asset (property) in India, by the overseas lender/ security trustee;
- In the event of enforcement/ invocation of the charge, the immovable asset (property) will have to be sold only to a person resident in India and the sale proceeds shall be repatriated to liquidate the outstanding ECB.
10.2 An authorised dealer which is an Indian correspondent of an overseas lender may create a mortgage on an immovable property in India owned by an NRI or an OCI who is a director of a company outside India, for a loan to be availed by the company outside India from the said overseas lender subject to the following conditions:
(a)The funds should be used by the borrowing company only for its core business purposes overseas; and
(b)In case of invocation of charge the authorised dealer should sell the immovable property to an eligible acquirer and remit the sale proceeds to the overseas lender.
10.3 A person resident outside India who has acquired any immovable property in India in accordance with foreign exchange laws in force at the time of such acquisition or with the general or specific permission of the Reserve Bank may transfer such property to a person resident in India provided the transaction takes place through banking channels in India and provided that the resident is not otherwise prohibited from such acquisition.
10.4 Any transfer of property not covered in these directions will require the prior permission of the Reserve Bank.
10.5 As per Government of India Press Release dated February 1, 2009, (given in the annex) in order to be considered as a person resident in India, a person has to not only satisfy the condition of the period of stay (being more than 182 days during the course of preceding financial year) but also his purpose of stay as well as the type of Indian visa granted to him should clearly indicate the intention to stay in India for an uncertain period. In this regard, to be eligible, the intention to stay has to be unambiguously established with supporting documentation including visa.
10.6 Any transaction involving acquisition or transfer of immovable property by a person resident outside India should be through banking channels in India.
10.7 Any existing holding of immovable property in India by a person resident outside India made in accordance with the policy in existence at the time of such acquisition would not require any modifications to confirm to the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.
11. Payment of taxes and other duties/ levies in India
Any transaction involving acquisition of immovable property by a person resident outside India shall be subject to applicable tax laws and other duties/ levies in India.