We had recently started this Q&A column on all matters pertaining to the purchase and sale of real estate in India, the extant laws that govern this, and numerous other related matters. While the column took a two-month holiday, it is now back for your continued benefi t. Readers of NRI Achievers are invited to send in their queries, which will be answered by leading experts and entrepreneurs in the domain of real estate development.
Is a PIO authorized to buy and sell properties in India ?
“Yes, a PIO (Person of India Origin), despite being a foreign citizen, is authorized to buy and sell properties in India. A PIO does not require prior approval of the RBI (Reserve Bank of India) in this case. Now question arises as to what type of property a PIO is authorized to buy and sell in India. In this regard, I would like to share here that a PIO can acquire agricultural land, a farm house, or even plantation property in India under inheritance. And there is no need to get prior RBI approval. Th ere are a lot of PIOs availing this facility, who visit India frequently particularly to get in touch with their roots.”
Would you please enlighten us on types of rental agreements in India ?
“NRIs and PIOs who buy properties in India generally rent them out to generate income instead of keeping the asset vacant. Th ey are right on their part as vacant properties are not productive and more of a liability. At the time of renting out a property, NRIs and PIOs usually have to arrive at two types of agreements, namely “rental lease agreement” and “leave and license agreement”. In the fi rst case there is a transfer of interest from a lessor to a lessee and in the second case the agreement ensures non-creation of any interest in the premises in favour of the licensee. I would also like to share here an important aspect that rent control laws do not apply to leave and license agreements.”
We would like to know about repatriationof sale proceeds of property sold in India.
“At the time of executing a property deal, one must keep in mind that one can sell the property only aft er three years of its date of purchase. Also one must be aware of the fact that she/he cannot accept cash payments. Moreover, the money generated out of sale deal can be deposited in NRO bank account. Besides, a certifi cate from a qualifi ed Chartered Accountant (CA) is required to establish that the money deposited in NRO account is from the sale of legally owned property.”
How much money is allowed to be repatriated by NRIs/PIOs in a fi nancial year?
“In one fi scal year (1st April to 31st March), an NRI/PIO is permitted to repatriate an amount up to US$ 1 million.” Also NRIs must provide all related documents relating to proof of inheritance of the property.
Is the branch / liaison offi ce of a foreign company eligible to buy immovable property in India ?
“Any foreign company that has established a Branch Offi ce or other place of business in India can acquire immovable property in India. But, the condition is that the Branch Offi ce or other place of business in India should be procured in accordance with the Foreign Exchange Management (Establishment in India of Branch or Offi ce or other Place of Business) Regulations, 2000. Th e payment for acquiring such a property should be made by way of foreign inward remittance through the proper banking channels. It is must that a declaration in form IPI be fi led with the RBI within 90 days of the date of acquiring the property. It is important to know that on winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of the Reserve Bank of India (RBI).