The law has come a long way since the days of the Fera (Foreign Exchange Regulation Act) regime, when buying or selling of immovable property was governed by the citizenship of a person. Under Fema (Foreign Exchange Management Act), the thrust is on residential status. But before we go into the details of the law, let’s get the definitions straight. An NRI is an Indian citizen residing outside India. A citizen of another country is a PIO (person of Indian origin) if he has held an Indian passport at any time or if he, his father or his grandfather has been a citizen of India. A citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan is not regarded as a PIO.
With the emphasis on residential status, a foreign citizen who is a resident of India can buy and sell properties without prior approval from the Reserve Bank of India, subject to a general ban on citizens of the eight countries mentioned above and restrictions on buying certain properties.
A foreign citizen of non-Indian origin cannot acquire agriculture land/farm house/plantation property in India without the prior approval of the RBI, whereas a foreign citizen of Indian origin can acquire such properties without the prior approval of the RBI but only by way of inheritance. Leasing of immovable property for a period of five years or less is freely permitted. The RBI does not determine the residential status of a person for the purpose of acquisition of immovable property in India. Under Fema regulations, residential status is determined by operation of law. The onus is on the individual to prove his residential status, if questioned by any other authority.
Acquisition by way of purchase
A general permission is available to NRIs or PIOs to purchase only residential/ commercial property in India. There is no restriction on the number of residential/commercial properties that an NRI or a PIO can buy. The name of a foreign national of non-Indian origin cannot be added as a second holder of a residential/commercial property purchased by an NRI or a PIO. A foreign national of non-Indian origin, resident outside India, cannot acquire any immovable property in India by way of purchase without the RBI’s nod. However, a foreign national of non-Indian origin, including a citizen of the eight countries mentioned above, may acquire only residential accommodation on lease, for not more than five years. He does not require the RBI’s permission for this. A person resident outside India (that is, an NRI, a PIO or a foreign national of non-Indian origin) cannot acquire agricultural land/plantation/farm house in India by way of purchase.
Sale of immovable property
An NRI can sell residential/commercial property in India to a person resident in India, an NRI or a PIO. However, a PIO can sell residential/commercial property in India only to a resident of India. He would need prior approval of the RBI for sale of residential/commercial property in India to an NRI or a PIO. A foreign national of non-Indian origin whether resident in India or outside India would require prior approval of the RBI for sale of residential property in India acquired with the specific permission of the RBI to a person resident in India or outside India. An NRI or a PIO may sell his agricultural land/plantation/ farm house in India to an Indian citizen resident in India. However, a foreign national of non-Indian origin, resident outside India, would require prior approval of the RBI to sell agricultural land/plantation/farm house acquired in India.