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FAQ’s – Buying Property
Q:

A:

Which documents are to be verified before purchase of a Flat ?

Before you purchase a flat, you have to have a title and document search conducted by a competent advocate. You cannot do it yourself. You have to use the services of a competent advocate. It is a professional job to be done with professional assistance.

Q:

A:

What is the difference between built up area, super built up area, and carpet area?

Carpet Area: This is the area of the apartment/building which does not include the area of the walls. Built up Area: This includes the area of the walls also Super Built up Area: This includes the built up area along with the area under common spaces such as the lobby, lifts, stairs, etc. This term is therefore only applicable in the case of multi-dwelling units.

Q:

A:

What are all the important documents one should check before buying any property ?

If you want to purchase a property, you have to look at the approved layout plan, approved building plan, ownership documents, carryout search, etc. Contact an advocate before you purchase a property so that he can advise you.

Q:

A:

Who is liable to pay Stamp Duty-the buyer or the seller?

The liability of paying stamp duty is that of the buyer unless there is an agreement to the contrary. Section 30, of Bombay Stamp Act, 1958 states the liability for payment of stamp duty.

Q:

A:

In whose name are the stamps required to be purchased ?

The stamps are required to be purchased in the name of any one of the executors to the Instrument.

Q:
A:
What is meant by the market value of the property and is Stamp Duty payable on the market value of the property or on consideration as stated in the agreement ?

Market value means the price at which a property could be bought in the open market on the date of execution of such instrument. The Stamp Duty is payable on the agreement value of the property or the market value which ever is higher.

Q:

A:

Which are the instruments that attract the payment of Stamp Duty ?

The instruments like Agreement to Sell, Conveyance Deed, Exchange of property, Gift Deed, Partition Deed, Power of Attorney, settlement and Deed and Transfer of lease attract Stamp Duty on market value of the property.

Q:

A:

Who is the appropriate authority for knowing the market value of the property ?

The Sub-Registrar of the area, in whose jurisdiction the property is located, is the appropriate authority for knowing the market value of the property.

Q:

A:

What are the risks associated in buying a flat on Power Of Attorney (POA) basis ?

Purchasing a flat on a POA basis is not permitted under the law of the land.

Q:

A:

Is a POA revocable ?

Yes, a POA can be either revocable or irrevocable, depending on what sort of a POA one has made.

Q:

A:

What exactly do we mean by a Free Hold flat? What are the advantages and disadvantages, if any ?

A freehold property (plot or a flat) is one where there is a whole and sole owner(s), ownership is full and unconditional (within the provisions of the laws of the land) and there is no lessor / lessee involved.

Q:

A:

How to convert a POA flat into a Free Hold one ?

POA cannot be converted into anything. Leasehold properties of DDA in Delhi can be converted to freehold, as per provisions.

Q:


A:

How to verify the authenticity of the various documents submitted by the seller of the house, particularly with regard to the possibility that the house has not been sold earlier to a third party ?

Regarding authenticity of documents, again, you have to take the help of an advocate to verify.

Q:

A:

Do we have any agency in Delhi which can provide a comprehensive service under one roof for hassle free purchase of society flats for its customers ?

Comprehensive services in the real estate sector are provided by several brokers in various cities of India.

FAQ’s – Selling Property
Q:

A:

What is the difference between built up area, super built up area, and carpet area ?

Carpet Area: This is the area of the apartment/building which does not include the area of the walls. 
Built up Area
: This includes the area of the walls also.
Super Built up Area
: This includes the built up area along with the area under common spaces such as the lobby, lifts, stairs, etc. This term is therefore only applicable in the case of multi-dwelling units.

Q:

A:

Who is liable to pay Stamp Duty – the buyer or the seller ?

The liability of paying stamp duty is that of the buyer unless there is an agreement to the contrary. Section 30, of Bombay Stamp Act, 1958 states the liability for payment of stamp duty.

 

Q:

A:

In whose name are the stamps required to be purchased ?

The stamps are required to be purchased in the name of any one of the executors to the Instrument.

Q:

A:

What is meant by the market value of the property and is Stamp Duty payable on the market value of the property or on consideration as stated in the agreement ?

Market value means the price at which a property could be bought in the open market on the date of execution of such instrument. The Stamp Duty is payable on the agreement value of the property or the market value which ever is higher.

Q:

A:

Which are the instruments that attract the payment of Stamp Duty ?

The instruments like Agreement to sell, Conveyance Deed, Exchange of property, Gift Deed, Partition Deed, Power of Attorney, settlement and Deed and Transfer of lease attract Stamp Duty on market value of the property.

 

Q:

A:

Who is the appropriate authority for knowing the market value of the property?

The Sub-Registrar of the area in whose jurisdiction the property is located is the appropriate authority for knowing the market value of the property.

FAQ’s – Renting Property
Q:


A:

If I am a tenant (old rental) of a property in Mumbai in a good area like Andheri, can I transfer my tenancy ? If yes, what amount of money can I demand from the Landlord for transfer of tenancy ?

Yes, you can transfer the tenancy, with the permission of the landlord. The rate is that which is prevailing in the market, the norm being that the landlord shall be entitled to 1/3 share.

Q:


A:

Now that the Maharashtra Rent Control Bill has come into force and the Pugree has been legalised, what is the percentage of sharing between the landlords and the tenants ?

No fixed percentage is prescribed by the Act, but the norm is 1/3 share goes to the landlord.

Q:

A:

Is there a provision by which a landlord is bound to spend a certain percentage towards the maintenance of his property ?

No.

Q:

A:

Where does one register new tenancies in Mumbai ?

With the Registrar of Sub Assurances located at Old Custom House, Shahid Bhagat Singh Road, Fort, Mumbai-400001 and at Bandra Kurla Complex, Bandra.

Q:

A:

Is one required to register existing tenancies as well ?

No.

Q:

A:

If a property is kept vacant for a period of one year, can it be let out at market rent ?

Yes.

Q:

A:

How does one determine the market rent ?

There is no prescribed manner but it can be easily found out by approaching such people as the brokers, registration authority, and appropriate authorities etc.

Q:

A:

How many months rent can the landlord take as deposit ?

Three months.

Q:

A:

In case a tenant is not protected by the Rent Act, what is the procedure to ask him to vacate and what is the notice period required to be given ?

Normal procedure is to send a notice to the tenant, failing which a court case may be filed which usually takes 10 to 20 years to reach a verdict.

Q:

A:

This is with reference to the Bombay Rent Act. We are tenants of an old building, which was repaired, by all the tenants in the year 1995-96. We are 32 tenants and would like to form a Co-operative Housing Society without the landlord”s permission. Can we form the society ?

Yes.

Q:

A:

70% of the tenants are ready to form a society. Is there any new provision in the new rent act for forming a society ?

There is no new provision in the new Rent Act regarding the prescribed percentage of tenants willing to form a society.

Q:

A:

Please suggest any way to form a society without the landlord”s permission.

Approach the registrar of Co-operative society and file the various relevant documents.

Q:

 

A:

I had a lease agreement for 6 years for a shop with a built in escalation clause @ 20% after 3 years. My lease expired on 31.3.2000 and my landlord has sent a written letter asking to pay rent at an enhanced rate. Is this sufficient to continue my lease or should I enter into another lease ? If I continue on the strength of this letter, are my rights affected ?

Yes. It is sufficient but not full proof. The rights won”t be affected as long as enhanced rent is paid. It also depends on the period/tenure prescribed in the letter. It is always advisable to make a new agreement with the landlord.

Q:

 

A:

I am a landlord of a building. I purchased the property in May, 2000 (at “x” amount). Mr. “A” was staying there since many years and the rent receipt is in his name. He expired 12 years before, he and four sons, namely B, C, D & E. Now B has 2 daughters. “C” has 2 daughters. “D” has no children. “E” has 1 son, named “F”. “F” is staying since 30 years. “F” wants to surrender his tenancy rights. B, C and D have left the flat since the last 30 years and have been staying elsewhere – what should I do as a landlord?

Transfer the rent receipt in favour of Mr. “F”.

Q:

A:

Do B”s and C”s daughters have any right over the property ?

No.

Q:

A:

What type of agreement do I have to make with the new tenant, considering the new Rent Act ?

No, new agreement is required.

Q:

A:

If “F” gives a notice in writing, to the landlord, to transfer the tenancy right in his name since he is staying in the flat for 30 years and at the time of expiry of his grand- father, he and his father “E” were staying there, is it admissible to transfer the tenancy in “F”s name and then transfer to the new buyer ?

Yes.

Q:

A:

If I take an indemnity bond from “F” that there are no legal heirs, or if he indemnifies me, then is it possible for “B, C, D” to take some legal action against me ?

No.

Q:

A:

Would the transfer fee that I get, be my capital gain or my income ?

The transfer fee will be treated as income not capital gain.

Q:

 

A:

M” purchased a flat in June 96 from a bank employee. The bank employee has not discharged the loan till date. For the purpose of flat registration and society transfer, M requires a NOC from bank. M paid stamp duty (under amnesty scheme). The bank employee has not paid the maintenance charges of the flat before June-96 also. Can society ask “M” to pay the maintenance charges prior to the June 96? What is the procedure to get NOC from the Bank? Is “M” the legal owner of the above flat ? Can “M” sell the flat again ?

Yes, if “M” has not obtained NOC from the society at the time of possession. You can get NOC by repaying the outstanding loan amount. M is not the legal owner till NOC from the bank is obtained. Yes. Provided “M” obtains the NOC from the bank and Society.

Real Estate For NRI
There are often doubts about acquiring property in India in the minds of Non Resident Indians (NRIs). Questions such as “Is it possible for me to apply for a loan from abroad” are bound to arise. Here, in this section, we have tried to considerably reduce the doubts by providing information on NRI investment rules in property, Acquisitions, Holding and documents required.

NRI Investment in the Indian Property Market

Defination

  1. Indian citizens who stay abroad for employment or for carrying on business or vocation or for any other purpose in the circumstances indicating a definite intention to stay outside India for an indefinite period.
  2. Indian citizens working abroad on assignment with Foreign Government or International Agencies
  3. Officials of Central and State Government and Public Sector undertakings deputed abroad on temporary assignments or posted to their offices abroad
  4. Indians who have settled abroad permanently or gone abroad on immigration. Non- resident Indians become residents of India when they return to India for employ ment or for carrying on any business or vocation or for any other purpose indi cating a definite intention to stay in India for an indefinite period. However, during their short visits to India for holidays or business, non-residents are not to be regarded as persons ordinarily resident in India.

Acquisition, Holding, etc. of Immovable Property in India by Certain Persons

11E.1 In terms of Section 31(1) of FERA 1973, persons who are not citizen of India(whether resident in India or not) and companies (other than banking companies) which are not incorporated under any law in force in India are required to obtain prior permission of Reserve Bank to acquire, hold, transfer or dispose of by sale, mortgage, lease, gift, settlement or otherwise any immovable property situated in India.

The work relating to the permission for acquisition etc. of immovable property is centralized in the Central Office of Reserve Bank (Foreign Investment Division) at Mumbai.

Notes:

A. The above restrictions do not apply to immovable property taken or given on lease for a period not exceeding five years.

B. Prior permission of Reserve Bank is necessary for acquisition, disposal etc. of flats in co-operative housing societies.

C. Nepalese or Bhutanese nationals, whether resident in India or not, as well as Nepalese companies in Bhutan should obtain, prior permission of Reserve Bank for acquisition, holding etc. of immovable property in India even though the transactions may be settled in Indian Rupees .

D. In case of partnership firms, if any of the partner is a Foreign citizen, the firm should obtain permission of Reserve Bank for acquisition /disposal of the immovable property. Likewise, if any member of the governing body of an association/organisation or any trustee of a trust is a Foreign citizen, such, a body/trustee should obtain Reserve Bank”s permission under Section 31(1) of FERA 1973.

Acquisition, Sale etc. of Immovable Property by Foreign Banks

11E.2 The acquisition, sale ect. Of immovable properties in India by Foreign banks operating in India is governed by the relevant provisions of Banking Regulation Act,1949 and the policy of Reserve Bank in this regard in force from time to time. Foreign banks should ensure while undertaking such transactions in immovable property that they are in accordance with the provision of the Act and directions issued, in any, by the Department of Banking Operations and Development of Reserve Bank.

Application forms

11E.3 Application for fresh acquisition or holding of immovable property in India (other than those covered under the general permission granted by Reserve Bank) should be made to Reserve bank in form IPI 1 and for sale/transfer of property (other than tea, coffee, rubber, etc. plantation or those covered by general permissions granted by Reserve Bank) in form IPI 2. Application for sale/transfer of tea, coffee, rubber etc. plantation should, however, be made in form IPI 3 together with the particulars of productivity, income, etc. in form IPI 4.

General permission for Acquisition of Property for Carrying on Activities permitted by the Reserve Bank

11E.4. By its Notification No. FERA 1343/93-RB dated 26th April 1993, Reserve Bank has granted general permission to companies, (other than banking companies), which are not incorporated under any law in force in India, to acquire or hold activity permitted by Reserve Bank under Section 28 or Section 29 of FERA 1973. Companies which acquire or hold any immovable property in India in terms of the general permission are required to submit to Reserve Bank a declaration in form IPI 5 not later than 90 days from the date of acquisition of the immovable property.

Note: The above general permission does not apply to Foreign companies that have been permitted under Section 29 of the Act to open liaison offices or to post representatives in India.

Properties held at the commencement of the Act

11E.5 In terms of Section 31(4), properties held since prior to 1st January 1974 i.e. the date of coming into force of FERA 1973, were required to be declared to Reserve Bank. Applications for the purpose were required to be made in form IPI 6. Holding licences have been issued by Reserve Bank on the basis of declarations received by it in terms of this provision.

General Permission for Acquisition/Disposal of Residential/Commercial properties by Foreign Citizens of Indian origin

11E.6 (i) By its Notification No.FERA.152/93-RB dated 26th May 1993, Reserve Bank has granted general permission to Foreign citizens of Indian origin, (whether resident in India or not), to acquire and dispose of immovable properties (other than agricultural land/farm house/plantation property) situated in India subject to the fulfilment of the following conditions:

A) Acquisition/Disposal of Residential Property/ies in India other than by way of Gift

1.Property is acquired by way of purchase or inheritance for the person”s bonafide residential use and transferred by way of sale. (No restrictions are placed on the number of residential properties that can be acquired/disposed of under the general permission except what is mentioned against condition 6 below)

2.Consideration for the property purchased is met out of Foreign exchange remitted from abroad through normal banking channels of funds withdrawn from the purchaser”s NRE/FCNR account maintained with a bank in India.

3.Property purchased is not let out, except where it is not immediately required for the purchaser”s own residential use.

4.A declaration is submitted to Reserve Bank (Central Office) about such acquisition in form IPI-7 within a period of 90 days from such acquisition/final payment of purchase consideration along with a certified of the document evidencing the transaction and bank certificate regarding the consideration paid.

5.Income accruing by way of rent or sale proceeds of the property or income arising out of investment of such proceeds is credited to the person”s NRO account (if the property is held by a non-resident Foreign citizen of Indian origin) or to the Resident Rupee Account i.e. Q.A.22 Account )if the property is held by a Foreign citizen of Indian origin resident in India) with a bank in India.

6.In respect of residential properties purchased on or after 26th May 1993, Reserve Bank would consider applications for the repatriation of sale proceeds up to the consideration amount remitted in Foreign exchange for the acquisition of the property (only up to two such properties) provided the sale takes place after three years from the date of final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later. Applications for the purpose should be made to Reserve Bank (Central Office) in form IPI 8 within 90 days of the sale of the property.

B) Acquisition/Disposal of Residential property by way of Gift

1.Properties (up to two houses) are acquired, transferred or disposed of by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin whether resident in India or not.

2.Gift tax, if any, has been paid.

C) Acquisition by way of purchase or inheritance or Disposal by way of Sale of commercial Property/ies in India

1.Property (not being agricultural land/farm house/plantation property) situate in India is acquired by way of purchase or inheritance and transferred or disposed of by way of sale (No restrictions are placed on the number of such properties acquired/disposed of under the general permission except what is mentioned against condition 4 below).

2.Consideration for the property purchased is met out of Foreign exchange remitted from abroad through normal banking channels or funds withdrawn from the purchaser”s NRE/FCNT account maintained with banks in India.

3.A declaration of submitted to Reserve bank (Central Office) about acquisition of the commercial property in form IPI-7 within a period of 90 days from such acquisition/final payment of purchase consideration along with a certified copy of the document evidencing the transaction and bank certificate regarding the consideration paid.

4.Reserve Bank would consider applications for repatriation of original investment in commercial property in respect of properties purchased on or after 26th May 1993 up to the consideration amount remitted in Foreign exchange for the acquisition of the property provided the property is sold after a period of three years from the date of the final purchase deed or from the date of payment of final instalment of consideration amount, whichever is later.

The balance amount of sale proceeds of the property/ies should be credited to the seller”s NRO account or Resident Rupee Account (Q.A. 22 Account) in the case of resident Foreign citizens maintained with a bank in India. Applications for repatriation of the amount should be made to Reserve Bank (Central Office) in form IPI-8 within 90 days of the sale of the property.

(ii) For the purpose of above general permission, a Foreign citizens is deemed to be of Indian origin if (a) he held an Indian passport at any time, or (b) he or his father or paternal grandfather was a citizen of India by virtue of the constitution of India or the citizenship Act, 1955 (57 of 1955) provided that the citizen of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka and Nepal shall be deemed to be not of Indian origin.

(iii) Non-resident Indian nationals are also eligible for the facility regarding repatriation of sale proceeds of the properties referred in terms A.6 and C.4 above of sub-paragraph (i), provided the other conditions referred to in the said sub-paragraph are satisfied.

General Permission for letting out of Residential Property in India by Non-resident Indians and Persons of Indian origin

11E.7 By its Notification No.FERA.155/93-RB dated 16th September 1993, issued under Section 29(1) of FERA 1973, Reserve Bank has granted general permission to non-resident Indian citizens and Foreign citizens of Indian origin to let out any immovable property in India held by them.

The rental income or proceeds of any investment of such income shall not be repatriable outside India at any time in future and such funds should be credited to the owner”s Ordinary Non-Resident Rupee (NRO) account maintained with a bank in India.

Purchase of Immovable Property in India by Foreign Citizens of Non-Indian origin/Foreign Companies

11E.8 (i) Foreign citizens of Non-Indian origin (whether resident in India or not) and Foreign companies including trusts, societies and associations incorporated/registered abroad will be permitted by Reserve Bank, on application, to acquire immovable property in India, provided the following conditions are satisfied.

a.The property to be purchased is for residential use only.

b.The consideration for purchase of the property is met out of Foreign exchange remitted from abroad in any convertible currency through normal banking channels.

c.Income accruing by way of rent from the property purchased, or the sale proceeds of such property/income arising out of investment of such sale proceeds at any future date shall be credited only to the Ordinary Non-resident rupee (NRO) account of the non-resident purchaser and will not be allowed to be repatriated outside India.

Applications for necessary permission under Section 31(1) of FERA, 1973 for purchase of immovable property in India should be made in form IPI 1 together with the documents indicated therein the chief General Manager, Exchange control Department, (Foreign Investment division-III), Reserve Bank of India, Central Office, Mumbai-1.

Acquisition, Transfer of Property in India by way of Lease, Mortgage, Gift, Inheritance, etc.

11E.9 Applications for permission to acquire or transfer immovable property by way of lease exceeding 5 years or by way of mortgage, gift, inheritance, settlement, etc. other than those covered by general permissions referred to in paragraphs 11E.4 and 11E.6 should be made to Reserve Bank in the appropriate form together with relevant documents indicated therein (see paragraph 11E.3).

Documents Required for Housing Loan

  1. Latest Work Permit/Employment Contract attested by Embassy/Employer.
  2. Copy of Visa stamped on passport.
  3. Salary particulars of last three months.
  4. Identity Card.
  5. C.D Certificate for Merchant Navy employees.
  6. General Power of Attorney holder in India (for those institution not having office in the respective country of loanee) .
  7. Letter from Bank stating Account type and Number, balance in account and rate of exchange of currency .
  8. Repayments through NRE Account.

NRI Investment In The Indian Property Market

What I need to know to invest in real estate as NRI in India

Following rules are required to be known by you to invest in real estate in India:

  1. Exchange Control Regulations affecting the acquisition of residential property in India Consequent to the liberalisation in Exchange Control policy and procedures, certain relaxations in the existing regulations and procedures governing the acquisition, holdings, etc. of Immovable property in India, have been announced.
    Immovable property may be a residential house, a residential flat or a plot of residential house.
    The current position therefore is as under:

    • 1.1. Non-resident Indian holding Indians passport do not require any permission from RBI for acquiring Immovable Property for bona fide residential purposes, as section 31 of FERA 1973 is not applicable to them.
    • 1.2. 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.
    • 1.3. 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 of by way of sale or inheritance immovable properties situated in India provided;

      a) the property is for the purchasers bona fide residential purpose.
      b) 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 Account.
      c) income accruing by way of rent from the properties purchased or acquired by inheritance will have to be credited to the non-resident ordinary (NRO) account even if the purchase consideration was met out of NRE / FCNR Account.

    • 1.4. 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 IPI 7.
      The following documents must be submitted along with the declaration.

      • a) 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.
        b) 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 of consideration for the property out of those funds.
    • 1.5. Where a Foreign Citizen of Indian origin wishes to acquire a property out of funds held in NRO Account then the aforesaid general permission does not hold and a prior permission from RBI will be required which can be applied for in Form IPI.1.
    • 1.6. Where a Foreign Citizens 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 I.
    • 1.7. Any number of properties can be acquired by a non-resident Indian regardless of whether they are holding Indian passport provided they are required for bona fide residential purposes.

Frequently Asked Questions

Is it possible for me to apply for a loan at HDFC or any other source from United States. If so How?

Yes. It is possible for you to apply for a loan through HDFC or any other financial institution from USA. You will have to approach HDFC or any other financial institution directly and request them to send you the rules and regulations for such loan.

What is an NRI/NRE account and how one can set one up?

NRIs are permitted to maintain accounts in rupees and Foreign currency. NRE account is Non-resident (External) Rupee Account permitted to be maintained by NRIs. This account can be opened by an authorised Bank without the prior permission of Reserve Bank. Funds for opening of or credit to NRE accounts shall, however, have to be remitted from abroad or FCNR account or tendered in the form of Foreign currency notes, travellers cheques etc., while on a visit to India. Further, that amounts deposited in NRE accounts are allowed to be repatriated.

Repatriate the sale proceeds:

Repatriate the preceeding as the RBI has vide Notification No.FERA/152/152/93-RB dtd.26.5.93 allowed repatriation of Investment in Residential property to persons of Indian origin whether holding Indian passport or a Foreign passport (NRI) after obtaining the prior approval from the RBI and this facility is restricted to a maximum of two houses.

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

  1. The residential properties are purchased on or after 26.6.1993.
  2. 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 the payment of final instalment, where the agreement for purchase so provides.
  3. 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.
    1. The repatriation is subject 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.
    2. As regard the property which you may inherit from your parents after their death you shall be entitled to hold the same subject to the rules and regulation of Foreign Exchange Manuals but repatriation shall not be allowed as aforementioned.

I am a US citizen of Indian origin. What legal steps do I need to take to purchase property in India? Can I hold property under a living trust that I have in USA?

  1. 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.
  2. 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.
  3. 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 of by way of sale or inheritance immovable properties situated in India provided
    1. the property is for the purchasers bonafide residential purpose;
    2. 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;
    3. income accruing by way of rent from the properties purchased or acquired by inheritance will have to be credited to the non-resident ordinary (NRO) account even it the purchase consideration was met our of NRE/FCNR Account.

You cannot hold property under a living Trust that you have in USA as FERA 1973 cannot be extended to Foreign branches of societies, institutions, firms, bodies corporate not registered or incorporated in India.

I am an NRI and I wish to buy a house in India which is coming up for sale. My family also resides with me. I need to send some money (more than US $ 10,000) to purchase the same.

  1. How do I send money to India?
    You can remit funds through any normal banking channels in NRE/FCNR Account.
  2. Can I send this money to an SB account of my wife as a gift?
  3. If I send this money to an SB account, is this taxable?
    2) & 3) In answer to your query we advise you to remit the funds in your wife”s account abroad and pay for the flat by funds in your wife”s account through any normal banking channels as aforementioned and as then in that event the question of Tax does not arise.
  4. If I send this money to an SB account, can I issue cheques of that account to the sellers?Yes.
  5. Can I send rupee drafts to settle for the sellers directly from here?
    Yes.
  6. I wish to buy the property in my daughters” names who are minors. What should I do for this?
    Father as a guardian can buy the house in the name of minors. As such, in your case you can buy the house in the name of your minor daughters.
  7. Are there any other formalities?
    1. Non-resident Indian holding Indians 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.
    2. 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.
    3. 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 of by way of sale or inheritance immovable properties situated in India provided
      1. the property is for the purchasers bonafide residential purpose;
      2. 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;
      3. income accruing by way of rent from the properties purchased or acquired by inheritance will have to be credited to the non-resident ordinary (NRO) account even it the purchase consideration was met our of NRE/FCNR Account.
    4. 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 IPI 7. The following documents must be submitted alongwith the declaration.
      1. 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.
      2. Certificate from the declarant”s bankers in India evidencing receipt of inward remittance(s) in Foreign exchange through normal banking channerl or withdrawal of funds from the declarant”s NRE/FCNR account/FCNR Special Deposit Account and payment of consideration for the property out of those funds.
    5. Where a Foreign citizen of Indian origin wishes to acquire a property out of funds held in NRO Account then the aforesaid general permission does not hold and a prior permission from RBI will be required which can be applied for in Form IPI 1.
  8. Can I send the whole amount by one single cheque? Will that be a problem?
    You can send the whole lot of money by one single cheque and there is no problem on that.

I am an NRI. I want to buy a flat in India in my mother”s name. Does my mom have to pay tax on it or are there other complications? My mom has no other source of income.

Under Section 31 (1) of FERA 1973, General Permission has been granted to persons of Indian origin whether holding Indian passports or Foreign passports to acquire, transfer or dispose of residential properties (restricted to two houses) situated in India by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin, whether resident in India or not.

For enabling you to buy the house in your mother”s name you must transfer the money through normal banking channels in her account in India and she should buy the flat in her name from the money remitted by you. As the money remitted by you will be considered a gift to your mother, there will be no tax payable by her.

Is it difficult for a US citizen to purchase property in India?

Consequent to the liberalisation in Exchange Control policy and procedures, certain relaxations in the existing regulations and procedures governing the acquisition, holdings, etc. of immovable property in India, it is not very difficult for a US citizen of Indian origin to purchase property in India subject to the following:

As per the recent relaxation, the RBI has granted General Permission to Non-Resident Indians holding Foreign passports (Foreign citizens of Indian origin) to acquire, hold, transfer or dispose off by way of sale or inheritance immovable properties situated in India provided

  1. the property is for the purchaser”s bona fide residential purpose
  2. 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
  3. income accruing by way of rent from the properties purchased or acquired by inheritance will have to be credited to the Non-Resident Ordinary (NRO) Account even if the purchase consideration was met out of the NRE/FCNR 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 IPI 7.

I need information on investment in property by NRIs.

Consequent to the liberalisation in exchange control policy and procedures, certain relaxations in the existing regulations and procedures governing the acquisition, holdings, etc., of immovable property in India have been announced.

Immovable property may be a residential house, a residential flat or a plot of land. The current position is as under. A Non-Resident Indian holding Indian passport does not require any permission from RBI for acquiring immovable property for bona fide residential purposes, as section 31 of FERA 1973 is not applicable to them. Non-Resident Indians holding Indian passports may pay the purchase consideration either by remittance of funds from abroad through normal banking channels or out of NRO Accounts or out of NRE Account or 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 of by way of sale or inheritance immovable properties situated in India provided

  1. the property is for the purchaser”s bona fide residential purpose (b) 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 (c) income accruing by inheritance will have to be credited to the Non-Resident Ordinary (NR) Account even if the purchase consideration was met out of NRE/FCNR 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 IPI 7.

Does an NRI holding Indian passport need permission from Reserve Bank to purchase immovable property in India?

No. There is no provision in FERA 1973 which puts any restriction on NRIs holding Indian Passports to acquire any immovable property in India provided the NRI does not engage in any agricultural/plantation activity or real estate business i.e. dealing in land and immovable property with a view to earning profit or income therefrom.

Are Foreign passport holders of Indian origin allowed to purchase immovable property in India?

Yes. Foreign nationals of Indian origin whether resident in India or abroad, have been granted general permission to purchase immovable property in India for their bonafide residential purposes, if the consideration is paid out of inward remittances in Foreign currency or by debit to NRE/FCNR accounts. However if the consideration for the property purchased is proposed to be paid in Indian rupee, prior permission of Reserve Bank is necessary.

How many properties can be acquired by a Foreign national of Indian origin in India without the permission of Reserve Bank of India ?

There are no restrictions on the number of properties that a Foreign national of Indian Origin can acquire for residential purposes, provided the purchase price is paid in Foreign currency remitted to India. Partial repatriation out of sale proceeds, limited to the original investments in respect of only two properties will be allowed, provided such properties were acquired after 26-5-1993 and sold only after a period of three years from the date of their acquisition.

Can a Foreign national of Indian origin pay the purchase price of the residential property out of his NRO account?

No. The purchase price should either come from remittances from abroad or by debit to his NRE/FCNR account.

A Foreign national of Indian origin does not require his flat immediately for his residential use. He therefore wants to give on rent. Can the rent be credited to his NRE / FCNR account?

No. The rental income should be credited only to his NRO account.

A Foreign citizen of Indian origin wants to give his immovable property in gift to resident in India who is his friend. Can he do so?

Property (Upto to a limit of two houses) can be acquired, transferred or disposed of by way of gift from or to a relative who may be an Indian citizen or a person of Indian origin whether resident in India or not provided Gift tax is paid and the donee falls in the category of a relative within the meaning of Section 6 of the Companies Act, 1956.

Does a Foreign citizen of non-Indian origin require permission of RBI for acquisition of immovable property?

Yes. Reserve Bank may grant necessary permission to Foreign citizens of non-Indian origin/Foreign Companies, if the property is purchased for residential use and the consideration is paid by way of Foreign exchange . Income accruing by way of rent etc. from such properties will be credited only to the NRO account. Sale Proceeds will not be allowed to be repatriated but are to be credited in NRO account only. The application by Foreign citizen be made in form IPI 1.

Can Nepalese / Bhutanese acquire immovable property in India, without any restriction?

No. They are treated as Foreign nationals of Non-Indian Origin. Permission under section 31 of FERA is must. RBI gives permission only after getting clearance from Ministry of Finance, Govt. of India, New Delhi.

Stamp Duty and Annual taxes.

As far as payment of taxes are concerned, it is Rs 1 per square feet approximately of the super built-up area of the premises comprised in the buildings constructed on or before 1983-84. Taxes for the buildings constructed after the year 1985 vary from building to building depending on the year of construction, amenities, location of building, etc., and usually varies from Rs 1-3 per square feet approximately.

NRI News

Overseas Corporate Bodies enter Real Estate business

Non Resident Indians (NRIs) are now permitted to invest upto 100% in the new issues of equity shares/convertible debentures of Indian companies engaged/proposing to engage in the following areas:

  • Real Estate covering construction of residential and commercial premises including business centres and offices.
  • Development of township.
  • Development of serviced plots and construction of built-up residential premises.
  • Manufacturing of building materials.
  • Financing of housing development.
  • City and regional level urban infrastructure facilities including roads and bridges.
  • On “non-repatriable” basis, investment in proprietary or partnership firms engaged in real estate development is permitted.

The Reserve Bank of India (RBI) has permitted Overseas Corporate Bodies (OCBs) to enter the sector by relaxing certain provisions with regard to investment in Indian companies engaged in housing and real estate development. It can be done by either forming a partnership firm or investing in a company incorporated in India.

RBI has permitted limited repatriation facility to the interest or income portion on the investment subject to the terms and conditions that capital invested shall not be repatriable.

Investment in real estate development has since been extended to OCBs predominantly owned by NRIs.

Repatriation of the original investment in Foreign exchange made by NRIs/OCBs will be permitted with prior permission of RBI, only after a lock in period of three years from the date of issue of shares/debentures. In addition, they will be permitted to repatriate the net profit (upto 16%) arising from the sale of such investment after the lock in period of three years.

Housing loans for NRIs

Housing and Urban Development Corporation (HUDCO) has decided to enter into retail financing for the non-resident Indian (NRI) category and will announce an NRI-oriented scheme offering credit up to Rs.50 lakh in the next three months.

HUDCO has already received the necessary approvals from the Reserve Bank of India for this scheme, which should be launched by March 2000. The loans would be given for purposes involving purchase of plots, improvement of existing property and construction on plots with a repayment facility in both, Indian currency and Foreign exchange.

Frequently Asked Questions for Non-Resident Indians
Q:

A:

Who is an NRI?

Under the Foreign Exchange Regulation Act of 1973, Non-Resident Indians are:

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.

OR

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.

OR

Government servants deputed abroad on assignments with Foreign Governments or regional/international agencies like the World Bank, International Monetary Fund (IMF), World Health Organization (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP),

OR

Officials of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

Guidelines Issued by the Reserve Bank of India for grant of Housing Loans to NRIs

The Reserve Bank of India (RBI) has issued certain guidelines for granting loans to Non-Resident Indians. The guidelines are:

  • The loan amount shall not exceed 85% of the cost of the dwelling unit.
  • Own contribution, which is the cost of dwelling unit financed less the loan amount, can be met from direct remittances from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.
  • Repayment of the loan, comprising of the principal and interest including all the charges are to be remitted from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.
Q:


A:

For what purposes are loans available to NRIs?

NRIs can avail loan for buying or constructing a new home, extending or improving an existing home or even to buy a plot.

 

Q:

A:

What is meant by “Own Contribution”? How can this “Own Contribution be paid”?

Own Contribution is the cost of the dwelling unit financed less the loan amount. The own contribution should be met from direct remittances from abroad through normal banking channels or from the Non-Resident (External) Account/Non-Resident (Ordinary) or the Non-Resident Special Rupee account in India.

Q:

A:

Where does one register new tenancies in Mumbai ?

The following documents are required along with the application form:

  • Photocopy of the labour contract duly countersigned by your employer (translated to English for non-English documents).
  • Latest salary certificate (in English) specifying the following:
    • Name (as it appears in the passport).
    • Date of joining.
    • Passport Number.
    • Designation.
    • Perquisites and salary.
    • Photocopy of labour card/identity card.
    • Photocopy of valid resident visa stamped on the passport.
    • Photocopy of monthly statement of local bank account.
    • Property related documents.
Q:

A:

What security will I have to provide?

Typically the security for the loan is first mortgage of the property to be financed, normally by way of deposit of title deeds and/or such other collateral security as may be necessary.

In addition interim security may be required, if the property is under construction. Collateral or interim security could be in the form of assignment of life insurance policies, surrender value of which is at least equal to the loan amount, pledge of shares and such other investments.

Q:

A:

Can I give a Power of Attorney in favour of a person of my choice in India to complete loan formalities on my behalf?

Yes. Normally it is desirable to appoint a Power of Attorney in India to represent you in dealings in India. The Power of Attorney should be executed as per drafts provided by the housing finance company. The Power of Attorney can be given to any person of your choice in India.

FAQ’s – Housing Loans
Q:

A:

How much housing loan can one get ?

Housing loan will be sanctioned depending upon your repayment capacity and according to your income. Your spouse”s income can be included, if you want to increase the amount of your loan. The maximum loan that can be sanctioned varies with housing finance companies and ranges from Rs.10 lakh to Rs.1 crore.

 

Q:

A:

What are the tax benefits that are available if one avails of housing loan ?

Tax benefits are available on both the principal and interest components of the loan as per the income tax act. The upper limit of the amount of deduction of interest repayment allowed from your gross total income is now Rs. 75,000 p.a.. Besides, Sec. 88 offers you tax benefits for principal repayments. The principal repayment amount included in the overall limit of Rs 60,000 offered by this section is Rs 10,000.

 

Q:

A:

What is reducing balance ?

Reducing balance is the method of reducing the principal amount already paid, from the outstanding loan amount. Every time you make a payment,you pay interest on that part of the original principal sum that has remained un-repaid till then.

Q:

A:

Which loan is cheaper the monthly reducing balance or the annual reducing balance ?

The best way is to compare the EMIs and the tenures of the two home loans. The loan carrying the lower EMI for the same tenure is the cheaper option.

Q:

A:

What is a fixed rate home loan ?

A fixed rate home loan, is a loan where the interest rate is constant over the entire tenure of the loan tenure.

Q:

A:

What is a floating interest rate ?A floating interest rate loan, is a loan where the interest rate payable is linked to the market rate like the bank lending rate. As the bank rate varies, the interest rate payable by you will also rise and fall. Hence you will have to bear the risk of interest rate fluctuations, the floating interest rates offered are slightly lower than the fixed interest rates.
Q:

A:

What is a home Extension Loan ?

A home extension loan is a loan which helps you to meet the expenses of any alteration like extension/expansion or modification of your home. You can avail of a home extension loan, after obtaining the requisite approvals from the municipal corporation.

Q:

A:

What is home Improvement Loan ?

A home improvement loan is one that is made available for you to do certain external work like structural repairs, waterproofing or internal work like tiling and flooring, plumbing, electrical work, painting, etc.

FAQ’s – Inheritance of Property
Q:

 

A:

Immediately after purchasing an ownership flat, my father expired. He had taken HDFC loan and was well aware of the tax provisions. My mother and myself are staying in the flat. I have been paying the Equated Monthly Instalments (EMI) which consist of part interest and part loan repayment. I have been receiving conflicting opinions regarding the deductibility of the interest element and the rebate on loan repayment. Can you give your opinion ?

It is not you but your father who had borrowed the funds from HDFC. The rebates and deductions are not available to those who have not borrowed the funds directly and these facilities are not available to the successor to the property. This was the view taken by the Gujarat High Court in respect of CIT v Rajkot Seeds Oil & Bullion Merchant Association Ltd. (1975) 101ITR748. This is indeed very sad. I do not think that it was the intention of the legislation to deprive the inheritor of the property of these concessions.

FAQ’S – Tax Related Matters
Q:

A:

Is it necessary to obtain any permission, from the Income Tax authorities if I want to purchase any immovable property ?

There is restriction on transfer of immovable property under Section 269UC of the Income Tax act.

Q:


A:

Does the Indian Income Tax Act offers any special incentive for purchase of residential property by obtaining finance either from banks or other financial institutions ?

Under Section 88 of the income tax you can claim benefit for the principle repayment, interest on loan is deductible u/s 24 from income from House Property.

 

Q:

A:

Whether the benefits attached to a residential property are also available to a commercial property ?

No such benefits are not available for commercial Properties.

Q:


A:

What are the formalities specified under the Indian Income Tax Law, if any, that one has to complete before or after selling any house property, commercial or residential ?

You have to obtain Permission u/s 230A of the Income Tax Act if the value of the property to be sold is more than 5 lakh.

Q:


A:

Whether incidental charges like brokerage, registration fees, stamp duty and other charges arising out of sale of house property deductable from profit arising on sale ?

These expenses are allowable expenses from the full value of consideration of the sale of house property.

Q:

A:

Is there any way by which I can claim exemption from tax on capital gain ?The Income Tax act has made provision u/s 54 & 54A–G of the act whereby you can claim exemption from tax on capital gains.

Sec. 54: Purchase or construct another residential house worth the amount of capital gains. Sec. 54 protects capital gains arising out of sale (or transfer) of a residential house whether self-occupied or not, provided the assessee has purchased within 1 year before or 2 years after the date of sale of the original asset or has constructed within 3 years after that date, a residential house. The only condition is that the newly-acquired property should not be sold within 3 years from the date of its purchase or construction. If this condition is not satisfied, the cost of the new asset is to be reduced by the amount of long-term capital gains exempted from tax on the original asset and the difference between its sale price and the reduced cost will be chargeable as short-term (yes, short-term!) capital gain earned during the year in which the new asset is sold. This condition is unfair. One of my readers, Capt. Shelar, had sold a house situated in a main city and purchased a more spacious house in the suburbs. After moving in he found that one of the neighbours is a goonda and another is running a brothel. He desired to shift in a hurry but alas! He found himself trapped. Sec. 54EA & 54EB: Invest within 6 months the amount of capital gains in avenues covered by Sec. 54EB which locks in the funds for 7 years or invest the of sale proceeds in avenues covered by Sec. 54EA which locks in the funds for 3 years. Sometimes the same avenue also attracts tax rebate u/s 88. However, if the assessee has availed of the Sec. 54EA/EB exemption from capital gains by contributing a certain amount, the rebate u/s 88 will not be allowed on the same amount and vice versa.