India has a policy for non-residents which invites them to invest in the construction and development sector. For investment in independent premises, the policy is open only for NRIs.
A look at the relevant laws
Currency and exchange control
Framed under Section 47 of the Foreign Exchange Management Act, 1999, the Foreign Exchange Management (Acquisition and Transfer of Immoveable Property in India) Regulations, 2000, apply on immoveable property transactions by non-residents or other transactions involving foreign exchange. The Reserve Bank of India classifies FEMA transactions into two types: capital account transactions and current account transactions. Real estate investment is a capital account transaction.
Tax regime
In India, anyone is taxed on the basis of residence and not citizenship. Indians are subjected to tax in India on their global income while non-residents are taxed on their Indian source of income.
Investment in independent premises for NRIs and PIOs
- Non-resident Indians (NRIs), persons of Indian origin (POIs) and foreign nationals have to ensure that the land on which the purchased property is built is not agricultural land or plantation property, as these types of land can only be purchased by an agriculturist who is an Indian citizen.
- An Indian citizen resident outside India or a PIO does not require any special permission to buy immovable property in India. However, the payment has to be made in Indian currency through normal banking channels, or funds maintained in any non-resident account under the FEMA and the RBI regulations. Foreign nationals and foreign companies are barred from purchasing a property in India.
- Any residential or commercial property can be bought by an NRI but no business can be carried out on the premises.
- As far as disposal of property is concerned, an NRI can sell his property to a fellow NRI or any Indian citizen.
NRIs and foreign nationals investing in real estate business
With a ban on direct business, non-residents are permitted to invest in real estate development activity through Indian companies. According to the new policy, any project under construction, regardless of size, can have access to FDI.
There is a lock-in period of three years before which the minimum investment can be repatriated. Investments may be routed through Mauritius or Singapore so as to make use of tax treaty provisions.
