- Can NRIs obtain loans for buying a house/flat for residential purpose from financial institutions providing housing finance?
- Reserve Bank has granted general permission to certain financial institutions providing housing finance to grant housing loans to non-resident Indians for acquisition of houses/flats for self-occupation subject to certain conditions.
- Can authorized dealer grant loans to NRIs for acquisition of a flat/house for residential purposes?
- Authorized dealers have been granted permission to grant loans to non-resident Indian nationals for acquisition of house/flat for self-occupation on their return to India subject to certain conditions. However, repayment of the loan should be made within a period not exceeding 15 years out of inward remittance.
- What are the schemes available to NRIs for direct investments in India with repatriation benefits?
- In the new issues of shares/convertible debentures of Indian companies, there are direct investment schemes such as 24% scheme/40% scheme/100% scheme.
- Domestic Mutual Funds floated by public/private sector institutions/companies and bonds issued by public sector undertakings is also a good option.
- How can an NRI obtain permission of Reserve Bank for investment in a sick industrial unit?
- Application for permission should be made by the Indian company to the Central Office of Reserve Bank in Mumbai in form RSU.
Procedure for Opening a Non-Resident (NRI) Accounts in India
Non resident Indians have been extended the facility to open an NRE/FCNR account from overseas, by downloading the form from the website of the bank of their choice.
Generally, the account opening form must be accompanied by
- A passport copy
- The visa or residence permit of the country the NRI is residing in, and
- A set of 2 photographs
The signatures on the form have to be verified by either officials at the Indian Embassy or consulate in the country of his residence or the Notary public. In case the particular bank has an overseas branch in the applicant’s city, documents can be verified at that office.
The initial remittance must be sent along with the documents.
NRIs can empower a local citizen to operate their domestic accounts through a Power of Attorney or a letter of authority. NRIs can appoint nominees, resident Indians or otherwise, to their account.
To download the account opening forms of some of the banks offering NRI services in India, please refer to:
- What is meant by leasehold and freehold properties?
Leasehold Property is property leased to a lessee for a stipulated period. The Lessee pays lease premium and annual lease amount as fixed by the Lessor. The land ownership rights remain with the Lessor and a prior sale-permission is normally required if you plan to transfer the property.
The owner of Freehold Property has good title over the property and he can sell the property to anyone at any time. Record of ownership of the freehold property can be ascertained from the office of the sub-registrar. It can be transferred by registration of the sale deed<
- What are the benefits of getting a leasehold property converted to a freehold property?
- The person can become a full- fledged owner by getting the sale deed of the property after getting it registered.
- The property would have better market value
- The property can be sold, mortgaged or kept as an asset for security in future.
- 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, you have to take the help of an advocate to verify.
- A flat in a Co-op Housing Society is to be gifted. What are the legal formalities? What about stamp duty?
Gift of an immovable property is considered as a 'transfer' under the provisions of the TOP Act and you have to have the transaction registered through a Gift Deed and pay stamp duty as per provisions of the relevant stamp act depending in which state the property is located.
- What is Stamp Duty? What are the benefits of paying Stamp Duty?
Stamp Duty is a tax, similar to sales tax and income tax collected by the government, and must be paid in full and on time. A stamp duty paid instrument/document is considered a proper and legal instrument/document. It gets evidentiary value and is admitted.
- 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.
- 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
- 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 an instrument. The Stamp Duty is payable on the agreement value of the property or the market value, which ever is higher.
- 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.
- 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.
- 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.
- Is a POA revocable?
Yes, a POA can be either revocable or irrevocable, depending on what sort of a POA one has made.
- Why is registration necessary?
Registration acts as a proof that a transaction has taken place. The registration of a document serves as a notice of the transaction to the persons affected by the transaction. It also serves as an implied notice to any person subsequently acquiring interest in the property, covered by the registered document.
When a document, which is to be compulsorily registered, is not registered, it fails to confer any title given by the document. The real purpose of registration is to ensure that every person dealing with property, for which compulsory registration is required, can confidently rely on the statement contained in the register as being a full and complete account of all transactions by which the title may be affected.
- What constitutes completion of the sale?
The transfer of a flat is completed when you have a sale deed/ agreement for sale coupled with actual custody. Generally, in all cases the entire amount is paid simultaneously with the handing over of physical ownership and signing of the transfer documents.
- Is it worth investing in property in India? What are the returns?
It is always worth investing in property in India, as this investment produces assets which give capital appreciation of 20-40% each year and a net yield after tax of 10-15% per annum.
In comparison to other opportunities for investment in stock markets, bond markets, bank/saving deposits/instruments, gold and precious metals, real estate investments provide:
- Highest returns
- Low volatility
- Lower liquidity
- Lowest risk.
- Which properties are worth investing in?
Investments can be made in land and built-up residential, commercial (office /IT parks) and retail properties for shopping malls and markets.
- How can I do it?
You need information on opportunities for real estate investments either through direct or indirect sources. These provide information on investment opportunities including invitations for investment opportunities from real estate developers on their properties, brokers or real estate agents in India as well as through a real estate portal.
- It is a general feeling that people involved in property dealing are unscrupulous. How can safety be ensured?
The real estate marketing India has matured, and definitely more professional than it was a few years ago. There are many established real estate developers operating across the country not only in 6 mega cities, 29 metro cities but also in many tier 2 cities. Do some research on them before you finalise your purchase. Good market information on standing and credibility of builders and developers would be a useful tool. In addition, the rating of developers and projects done by CRISIL and ICRA can also be used as guides.
Recently, in many cases, the complaints against unscrupulous builders for non-professional approach to product delivery and services and cost issues have been considered by consumer courts both at the state and national levels. This has helped in strengthening the healthy growth of the real estate segment.
- I would like to invest for 7 years.
There are three categories of investments - short, medium and long term.
You appear to be a medium-term investor and seven-year time period is a reasonably good term for property values to more than double in value. This can be seen of any property appreciation in the last decade in many cities and also cutting across low, middle and higher income housing and other commercial properties.
- What type of property would appreciate more - residential plots, or flats?
This depends. The appreciation in plots cannot be expected to be at the same rate at which built properties appreciate. Unless purchase of the plots is in an environment where the construction boom on the plots in the vicinity is also taking place at a faster pace. If you have long-term investment plans investment in plots will always fetch you positive results. However, for short and medium term investments, residential (individual housing or flats) is bound to fetch yields of about 20% annually
- 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.
- 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.
- 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.
- Upon buying a flat from a builder in a building under construction, what are the permissions and papers that one should check with the builder, so as to ascertain the authenticity of the builder?
When you are buying a flat from a builder in a building under construction, you have to check the following:
- Approved plan of the building along with the number of floors.
- Ensure that the floor that you are buying is approved.
- Check if the land on which the builder is building is his or he has undertaken an agreement with a landlord. If so, check the title of the land ownership with the help of an advocate.
- Check the building byelaws as applicable in that area and ensure that the builder is building without any violation of front setback, side setbacks, height, etc.
- Check specifications given in the agreement to sell of the sale brochure. Is he providing the same actually on the ground or not?
- Check the reputation of the builder.
- Ensure that urban land ceiling NOC (if applicable) has been obtained or not.
- NOC from water and electricity authorities also have to be obtained.
- NOC from lift authorities.
- How popular is investment in real estate and stocks and shares among NRIs?
Non-resident Indians are increasingly inclined towards ploughing back redemption proceeds from various NRI deposit schemes and investing them in real estate and stock markets. They are picking up equity stakes in Indian companies and form a major component of the country's foreign direct investment (FDI).
- What basics should be kept in mind to invest for long term in equities?
Knowing your time horizon of investment, risk and return expected on the investment and scrutinizing your overall financial position and long term goals before investing is the key to a wise investment.
- What are the chosen routes through which NRIs can invest in India?
Equities, Property and Mutual Funds are the three most sustaining ways for an NRI to invest.
- Why are mutual funds considered to be the best way to enjoy the benefits of investing in Indian equities?
Mutual funds are managed by professionals who know the nitty-gritty of it. Local broker can be unreliable.
- Is approval for RBI required to invest in mutual fund scheme?
For an NRI, no specific approval for investing or redeeming from mutual fund is required. Only OCBs and FIIs require approvals for it.
- Can government securities/ UTI units be transferred or sold?
Yes, provided the transfers/sales are arranged through an authorized dealer. Repurchase can be done directly by UTI.
- Can proceeds of National Saving Certificate or government securities be repatriated?
Sale/maturity of proceeds of such securities can be repatriated if the purchase was made out of funds remitted from abroad or out of NRE/FCNR accounts. In case of the purchase being made out of NRO accounts, it can only be credited to NRO accounts and cannot be remitted abroad.
- What is Portfolio Investment Scheme?
The Portfolio Investment Scheme allows NRIs to acquire shares/debentures of Indian companies or units of domestic Mutual Funds through the stock exchange(s) in India.
- Is there any ceiling on investment under the Portfolio Investment Scheme?
There is an overall ceiling of 5% of paid-up share capital of the company/paid-up value of each series of convertible debentures for purchase by NRIs/OCBs. However the ceiling can be raised to 24% if the company concerned passes a resolution to that effect in its general body meeting.
NRIs/OCBs can make investment up to 1% of the paid-up share capital/each series of convertible debentures. For domestic mutual funds, there is no ceiling.
What specific conditions need to be fulfilled for investing in mutual funds schemes on repatriable basis?
In order to invest on a repatriable basis, you must have an NRI or FCNR bank account in India. The mutual fund should comply with the terms and conditions stipulated by SEBI, the amount representing investment should be received by inward remittance through normal banking channels or by debit to NREAccount/ FCNR account of the NRI. The dividend/interest of units may be remitted through normal banking channels or credited to NCR/FCNR account of the investor.
- When can earnings on investments be repatriated?
For investments made on a repatriation basis, the net income or capital gains after tax arising out of investment is eligible for repatriation subject to regularity guidelines at the time of the repatriation. In the case of investment is made on a non-repatriation basis, only the net income, i.e., dividend arising out of investment is eligible for repatriation.
- Can loans be granted abroad against collateral of the shares/debentures of Indian companies?
Yes. Authorized dealers have the power to grant loans/overdrafts abroad to NRIs through their overseas branches and correspondents against collateral of the shares/debentures of Indian companies only if the concerned shares/debentures were acquired on repatriation basis
- For how long is the permission valid for buying shares/debentures and units of domestic mutual funds?
Approval from the Reserve Bank is valid for a period of five years from the date of issue. This can be renewed by a request by means of a simple letter.
- Q1). Are foreign Institutional Investors (FIIs), Non-Resident Indians (NRIs), and Persons of Indian Origin (PIOs) allowed to invest in Indian companies?
Ans: Yes, they are allowed to invest in the primary and secondary capital markets in India through the portfolio investment scheme(PIS). Under this scheme, FIIs/NRIs can acquire shares/debentures of Indian companies through the stock exchanges in India.
- Q2). What are the maximum overall investments one FII, NRI or PIO?
Ans: The upper limit for overall investment for FIIs is 24%, of the paid up capital of the Indian company, and 10% for NRIs and PIOs. The limit is 20% of the paid up capital in case of public sector banks, including the State Bank of India.
- Q3). Can the upper limit of the investments be raised under any special cases for FII, NRI or PIO?
Ans: Yes, the upper limit of 24% for FII investment can be raised up to sectoral cap/statutory ceiling, subject to the approval of the board and the general body of the company passing a special resolution to that effect. And the maximum limit of 10 % can be raised to 24% subject to the approval of the general body of the company passing a resolution, to that effect.
- Q4). For Non-convertible debentures of Indian companies, can NRIs investments still be made?
Ans: Yes, an NRI can make investment in non-convertible debentures but they need to require necessary permission (submit application) from Reserve Bank (Central Office) by the concerned Indian Company in form ISD.
- Q5). Can OCBs (Overseas Corporate Bodies) make similar investments in mutual funds on non-repatriation basis?
Ans: Overseas Corporate Bodies can make such investments only in domestic public/ private sector Mutual Funds. They can also make investments in Money Market Mutual Funds.
- Q6). Is the ceiling for FIIs dependent of the ceiling of 10/24 per cent for NRIs/PIOs?
- Q7). Who monitors the maximum limits on FII, NRI or PIO investment in Indian companies on a daily basis?
Ans: The Reserve Bank of India (RBI).
- Q8). Does it require permission from the Reserve Bank required by NRIs for sale/transfer of shares/debentures of Indian companies to other NRIs?
Ans. No. Transfer of shares/debentures of Indian companies by NRIs to other non-residents does not require permission of Reserve Bank. However, the transferee NRI would need permission for purchase of such shares for which an application is required to be made to Reserve Bank in form FNC.
- Q9). Is permission of RBI required if an NRI intends to invest in new issues of Indian companies on non-repatriable basis?
Ans. No. Indian companies have been granted general permission to accept investments on non-repatriation basis, in shares/convertible debentures by way of new/rights/bonus issue provided the investee company has not undertaken agricultural/plantation activity and/or real estate business excluding real estate development i.e. development of property and construction of houses.
Overseas Indians willing to sell property in India can remit the proceeds of the sale back to their home country, provided the consideration received from the sale is not more than the amount invested by him at the time of purchase. Moreover, the individual can not transfer proceeds of more than two properties outside the country.
Acquisition /Selling/Transfer of Property in India by an Indian citizen resident outside India
A person resident outside India, but is still a citizen of India, can
- acquire any residential or commercial property in India
- transfer any immovable property to a person resident in India
- transfer any immovable property other than agricultural/plantation property/farmhouse to a person resident outside India or to a person of Indian origin resident outside India
Acquisition / Transfer of Property in India by a Person of Indian Origin
- A PIO can acquire immovable property as a gift or an inheritance from an Indian resident or an NRI or a PIO
- A PIO can acquire immovable property from a PIO who had acquired the property from a resident Indian who had, in turn, acquired it as per the foreign exchange laws prevailing at the time.
- A PIO can sell property to a resident Indian, including agricultural and farmland property
- A PIO can gift residential or commercial property to a resident Indian or to NRI or a PIO