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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.
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 repatriable outside India subject to Income tax being paid.
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Are you an NRI and looking to buy a home in India? Get all your answers on how to buy a home away from home.
Understanding the legalities of homebuying is important when it comes to NRIs
Going into the legalities of purchasing a new home may become a tedious task. To make it simpler, we have listed the necessary points pertaining to legal considerations of acquiring a property in India.
Non-resident Indians holding an Indian passport do not require any permission from RBI to acquire immovable property for bonafide residential purposes.
- Non-resident Indians holding an Indian passport may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of their NRO/ NRE/ FCNR account.
Ensure that the title report of the property contains no conditions written in fine print and that there are no specific reservations by the State Government.
- Look for specific clearance reports. For instance, if the construction is near a seafront, you will need to check for a Coastal Regulation Zone (CRZ) clearance. If the project is being constructed over or in close vicinity of a heritage building, you must check for any heritage reservations for the premises. The idea is to ensure that you do not get stuck with a property that is or may get caught in any sort of a dispute. Lack of clearance of titles also means that you will not be able to avail home loans.
- Indian citizens who stay abroad for employment or for carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad
- Government servants who are posted abroad on duty with the Indian missions and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources
- Government servants deputed abroad on assignments with foreign Governments or regional/ international agencies like the World Bank, the International Monetary Fund (IMF), World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP)
- Officials of the State Government and Public Sector undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.
he Reserve Bank of India (RBI) has clarified that Non-Resident Indians (NRIs) and Persons of Indian Origin (PIO), purchasing immovable property in India must pay for the acquisition by funds received in India through normal banking channels by way of inward remittance from outside the country.
The NRIs and Resident Indians can also acquire immovable property in India other than agricultural property, plantation or a farmhouse. It has issued certain directives for sanctioning home loans to Non-Resident Indians.
The guidelines provided are:
- The home loan amount should not exceed 85% of the cost of the dwelling unit, As the remaining 15% needs to be provided by one’s own contribution towards the cost of unit financed
- The cost of dwelling unit which is by own contribution financed less the loan amount, can be met from direct remittances from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and/ or Non-Resident (Ordinary) [NR (O)] account in India
- However, repayment of the loan, comprising of the principal and interest including all the charges are to be remitted to the HFC from abroad through normal banking channels, the Non-Resident (External) [NR(E)] Account and /or Non-Resident (Ordinary) [NR (O)] account in India
The repayment option for NRIs is that they can pay through the funds held in any non-resident account maintained in accordance with the provisions of the Foreign Exchange Management Act, 1999, and the regulations made by the RBI from time to time.
Apart from the documents mentioned below, a vital document required while processing any NRI home loan is the ‘Power of Attorney’ (POA). Since the borrower is not based in India, the POA is important because HFCs would need a ‘representative’ ‘in lieu of’ the NRI to deal with if necessary. Although not obligatory, the POA is usually drawn on the NRI’s parents/ wife/ children.
The documents needed for obtaining NRI home loans are:
- Passport and Visa
- A copy of the appointment letter and contract from the company employing the applicant
- The labor card/ identity card (translated in English and countersigned by the consulate) if the person is employed in the Middle East Salary certificate (in English) specifying name, date of joining, designation and salary details
Bank Statements for the last six months
Having certain important documents is mandatory when it comes to home buying for NRIs
- Original title deeds tracing the title of the property for at least a period of last 13 years
- Encumbrance Certificate for the last 13 years
- Agreement of sale/ construction, if any
- Receipts for payments made for purchase of the dwelling unit
Approved plan/ license
- ULC clearance/ conversion order, etc.
- Receipts for having invested the margin money through normal banking channels from the Non-Resident (External) account in India and/ or the Non-Resident (Ordinary) account in India
- Latest tax paid receipt
- Allotment letter from the co-operative society/ association of apartment owners
- Agreement for sale/ sale deed/ detailed cost estimate from the Architect/ Engineer for property to be purchased/ constructed/ extended/ improved
- Copy of approved drawings of proposed construction/ purchase/ extension
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
- Parent’s/Grandparent’s Indian passport/ Birth Certificate/ Marriage Certificate substantiating the individuals claim as a person of Indian origin