Inherent Investment Potential

The real estate in the Indian sub-continent has an obvious potential for growth with the rising population. The discerning investor knows the importance of easy accessibility to schools, hospitals, shops, offices, entertainment centres and airports.

A real estate investment has far higher value in the major towns and cities of India. A wise investment here can benefit from the historic movement of population to urban centres. A process of economic liberalisation has also encouraged NRI investments into real estate with the advantage of repatriation of the capital invested and even the rental proceeds under the circumstances prescribed by RBI.

Returns from real estate have consistently performed well and even out performed the other investment options.

The Wise Investor

All property transactions in India come under a complex web of legislation impinges. A plethora of municipal rules can cause demolition of construction for violations. Income tax rules threaten expropriation for economic offences. Hindu joint family and other succession rules impact on property transfers. Land ceiling legislation affect titles. Neighbourhood groups can hold up construction with lawsuits and objections.

In this jungle of hidden threats and lurking dangers, the best option for the investor is to choose an agency with a proven track record. Past performance in completed projects is the best assurance to the wise investor.

Who is a non Resident Indian? (NRI)

Non Resident Indian has been defined as a person resident outside India. Person resident outside India under FEMA has been defined as a person who is a non resident India.

Person resident in India :-
1) a person residing in India for more than one hundred and eighty two days during the course of the preceding financial year but does not include

• a person who has gone out of India or who stays outside India, in either case
  a) for or on taking up employment outside India, or
  b) for carrying on outside India a business or vocation outside India, or
  c) for any other purpose, in such circumstances as would indicate his intention to stay outside India for an uncertain period ;
  
• a person who has come to or stays in India, in either case, otherwise-than
  a) for or on taking up employment in India, or
  b) for carrying on in India a business or vocation in India, or
  c) for any other purpose, in such circumstances as would indicate his intention to stay in India for an uncertain period;

2) any person or body corporate registered or incorporated in India,

3) an office, branch or agency in India owned or controlled by a person resident outside India,

4) an office, branch or agency outside India owned or controlled by a person resident in lndia.

a) at any time held Indian passport or

b) either of his parents or any of his grand parents was a citizen of Indian by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).

Sale/ Transfer of Immovable Property by NRIs/PIOs

As per the liberalised policy, transactions permitted without permission of Reserve Bank of India are tabulated hereunder:

a) NRIs / PIOs can remit the sale proceeds of immovable properties held by them for a period not less than ten years subject to applicable taxes.

b) NRIs / PIOs are allowed to remit the sale proceeds of assets in India acquired by inheritance / legacy. For this purpose, Non Resident Indian (NRI) in context to these regulations is a person residing outside India who may be an Indian citizen or a foreign citizen of Indian origin.

Person of Indian Origin (PIO) in context to these regulations is defined as an individual

1) who has retired from an employment in India,

2) who has inherited the assets which were acquired, held or owned by such a person, when he was resident in India or inherited from a person who was a resident in India, and

3) is a widow resident outside India and has inherited the assets of her diseased husband who was an Indian citizen resident in India.

Repatriation of Sale Proceeds.

NRIs / PIOs are permitted to repatriate

1) Sale proceeds of immovable properties other than agricultural land, plantation , farm house property on the following conditions. Acquisition of the property must be in accordance to the foreign exchange laws. There is no lock in period and therefore remittance can be made irrespective of the period of the property so held. Remittance should not exceed foreign exchange brought in to acquire the property or debit the NRE / FCNR account. Repatriation of sale proceeds is restricted to not more than two properties. If the property was acquired out of the loans from authorised dealer/Housing Finance Institutions, the repatriation of sale proceeds will not exceed the extent of loans repaid out of foreign inward remittance through normal banking channels or by debit to the NRE/ FCNR accounts.

2) Repatriation or credit to NRE / FCNR accounts is allowed for refund of application / ernest money / purchase consideration together with interest net of Income Tax subject to foreign exchange brought in through normal banking channels or debit to NRE / FCNR accounts.

Investment in Real Estate Development by OCBs

Non-Resident Indians are now permitted to enter into the business of real estate development. This can be done by either forming a partnership firm or investing in a company incorporated in India. The Reserve Bank of India has relaxed certain provisions with regard to investment in Indian companies engaged in housing and real estate development.

Person of Indian nationality/origin resident outside India (NRIs) are permitted to invest upto 100 percent in the new issues of equity shares/convertible debentures of Indian companies engaged/proposing to engage in the following areas:

• Development of serviced plots and construction of built-up residential premises
  
  
• Real estate covering construction of residential and commercial premises including business centres and offices. Development of township, city and region level urban infrastructure, facilities including roads and bridges. Manufacturing of building materials. Financing of housing development.
  
  
• Investment in real estate development has since been extended to Overseas Corporate Bodies (OCBs) predominantly owned by NRIs. Overseas Corporate Body would mean any overseas company, partnership company, society and other corporate body predominantly owned directly or indirectly to the extent of at least 60 per cent by NRIs and includes any overseas trust in which not less than 60 per cent beneficial interest is held by NRIs directly/indirectly but irrevocably (notification 159/94 of 5.10.94).
  
  
• Dividend/interest on equity shares/debentures can, however, be remitted as per the procedure laid down in paragraph 10.C.24 of Exchange Control Manual subject to payment of applicable taxes without any lock-in period.
  
  
• The facilities are granted to OCBs so long as the ownership/beneficial interest held in them by persons of Indian nationality/origin resident outside India continues to be at least 60 percent.
  
  
• The OCBs are required to furnish at the time of applying for the facility for the first time and thereafter as and when required by Reserve Bank/authorised dealers, a certificate from an overseas auditor/chartered accountant/certified public accountant in form OAC/OAC-1 as the case may be. The overseas auditor/chartered account/certified public accountant has to certify that the ownership interest in the OCBs is held by NRIs.
  
  
• The proformae of the certificates in form OAC/OAC-1 have been modified to ensure that the interest held by persons of Indian nationality/origin in the OCB is actually held by such persons and is not held by them in the capacity as nominees.