Legal Tips on NRI Real Estate Investments in India

Non Resident Indians (NRIs) are permitted to invest in real estate in India, without being subject to caps on the number or quantity of investments. The Indian Government gives preferential treatment to the NRIs to bring in valuable foreign exchange. NRI real estate investment is, however, governed by certain rules under the Foreign Exchange Management Act, 1999.

Foreign Exchange Maintenance Act: Regulations of Real Estate Investment for NRIs

According to FEMA, an NRI can purchase an immovable property in India with inward remittances from a bank account outside India or through a special NRI account within the country. FEMA also stipulates that prior to purchasing a real estate property, an NRI has to fill a specific form, called the IPI 7, with the central office of RBI. An NRI is also mandated to submit a copy of the title deed or any such document, proving that s/he has executed an agreement to buy a property in India.

Important Clauses under the Foreign Exchange Management Act

Some other clauses under the Foreign Exchange Management Act regarding the NRI real estate investment are:

• Sale of property: An NRI seeking to sell the property is subject to mandatory lock-in period of three years. Under FEMA regulations, an NRI can only sell the property after three years have lapsed since the date of acquisition of the property or the date of payment of final installment, whichever is later.
• Repatriation of sale proceeds: While it is easy for an NRI to remit inwards in India, outward remittances are subject to several legal bottlenecks. FEMA states that the amount of repatriation must not exceed the funds paid for acquisition of the property, regardless of the actual sales proceeds received. Moreover, an NRI can only repatriate the sales proceeds of maximum two properties, and the returns from real estate investment in India cannot be repatriated as dividends.