The NRI Guides Team regularly reviews this article to ensure the content is up-to-date and accurate. The last editorial review and update were on 22 October 2023.
For foreign citizens looking to invest in property, India is a viable option. There are several aspects that make purchasing property in India attractive for overseas buyers, including the country’s rapidly growing economy and stable political environment.
There are also several, Non-Resident Indians (NRI) with foreign passports and Persons of Indian Origin (PIO) who want to settle down in India. When they plan to move back to India, one of the first steps would be to buy a property.
However, there are a number of legal restrictions on foreigners buying property in India. Here we will discuss some of the key factors foreign nationals should consider when purchasing property in India.
Table of Contents
The below information has been prepared after studying the guidelines issued by the Ministry of External Affairs and Reserve Bank of India.
Can Foreigners Buy Property in India?
According to the Reserve Bank of India:
- Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong or the Democratic People’s Republic of Korea (DPRK), need special permission from the Reserve Bank of India to buy or sell property in India, except for leasing it for up to five years. However, this rule doesn’t apply to Overseas Citizens of India (OCI).
- Foreign nationals of non-Indian origin who are residents in India can buy immovable property, except for those 11 countries mentioned earlier. For example, a US citizen who is a legal resident of India is permitted to buy property in India.
- Foreign nationals of non-Indian origin who are residents outside India can lease property for up to five years and can inherit land from an Indian resident. They are restricted from acquiring any immovable property in India unless the property is inherited from a person who was a resident of India.
- All other acquisitions/ transfers by foreign nationals will require the prior permission of RBI.
Since there are different conditions applicable for Persons of Indian Origin (PIO), foreigners of non-Indian origin living outside India, and foreigners of non-Indian origin living in India, let’s discuss them in detail.
1. Persons of Indian Origin
A foreign citizen who is a Person of Indian Origin (PIO) can purchase any immovable property in India other than agricultural land, farmhouse or plantation property. He/she can also inherit such property by way of a gift from an Indian Resident, an NRI, or a PIO. Normally he/she wouldn’t require any approval from the authorities.
However, citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong or DPR Korea, cannot acquire or transfer immovable property in India without the prior permission of the Reserve Bank of India (RBI). They can only lease a property for a period not exceeding five years.
2. Foreigners Residing Outside India
Foreign nationals of non-Indian origin, resident outside India, are not permitted to acquire any immovable property in India unless such property is acquired by way of inheritance from a person who was resident in
India.
Also, note that foreign nationals of non-Indian origin who have acquired immovable property in India by way of inheritance with the specific approval of RBI cannot transfer such property without prior permission from RBI.
Some exceptions to this rule would be foreigners buying property for business activity, foreign diplomats or foreign spouses of NRIs/OCIs (which are explained below).
3. Foreigners Residing In India
Foreign nationals of non-Indian origin, who are Indian residents are allowed to purchase property in India but have to obtain the approvals and fulfil the requirements if any, prescribed by other authorities, such as the concerned State Government etc.
However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong or DPR Korea, would require prior approval from the RBI. Such requests are considered by RBI in consultation with the Government of India.
4. Foreign Spouse of an NRI/OCI Buying Property in India
According to RBI, a person resident outside India, not being a Non-Resident Indian (NRI) or an Overseas Citizen of India (OCI), who is a spouse of an NRI or an OCI may acquire one immovable property (other than agricultural land, farm house or plantation property), jointly with his/her NRI/OCI spouse subject to the conditions laid down in regulation 6 of FEMA 21(R).
The conditions are as below:
- The consideration for transfer shall be made out of (i) funds received in India through banking channels by way of inward remittance from any place outside India or (ii) funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank;
- No payment for any transfer of immovable property shall be made either by traveller’s cheque, by foreign currency notes or by any other mode other than those specifically permitted under this clause;
- The marriage should have been registered and subsisted for a continuous period of not less than two years immediately preceding the acquisition of such property;
- Provided further that the non-resident spouse is not otherwise prohibited from such acquisition.
5. Long Term Visa Holders
Citizens of Afghanistan, Bangladesh, or Pakistan who belong to minority communities like Hindus, Sikhs, Jains, Buddhists, Parsis, or Christians and have a Long-Term Visa (LTV) from the Indian Government can buy one residential property in India for themselves. They can also purchase one property for their own work or business.
Can Foreigners Inherit Property in India?
An NRI, PIO or a foreign national of non-Indian origin can inherit and hold immovable property in India from:
- a person resident in India
- a person resident outside India
However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange regulations applicable at that point in time.
Note that in such cases, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong or DPR Korea, should seek specific approval from the Reserve Bank.
A PIO or NRI may transfer agricultural land, plantation property or farmhouse acquired by way of inheritance, only to Indian citizens permanently residing in India.
Can Foreigners Sell Property in India?
A Person of Indian Origin (PIO) may sell any immovable property other than agricultural land, plantation property or farmhouse in India to a person resident in India. He can also transfer it as a gift to an Indian Resident or another NRI / PIO.
A PIO may transfer agricultural land, plantation property, or farmhouse in India by way of sale or gift to a person resident in India who is a citizen of India.Type of Property Sale Gift Any immovable property other than agricultural land, plantation property or farmhouse To Indian Resident, NRI (or PIO with prior approval of RBI) To Indian Resident, NRI or PIO Agricultural land, plantation property or farmhouse To Indian Resident Citizen To Indian Resident Citizen
Foreigners Buying Property in India for Business Activity
A branch, office or another place of business, (excluding a liaison office) in India of a foreign company established with requisite approvals wherever necessary, is eligible to acquire immovable property in India which is necessary for or incidental to carrying on such activity. This should be by following all applicable laws, rules, regulations or directions in force that are duly complied with.
The entity/concerned person is required to file a declaration in the form IPI with Reserve Bank, within ninety days from the date of such acquisition. The non-resident is eligible to transfer by way of mortgage the said immovable property to an authorised bank as a security for any borrowing.
On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of the Reserve Bank.
Purchase or Sale of Property by Foreign Diplomats
Foreign Embassies, Consulates, as well as Diplomatic personnel in India, are allowed to purchase or sell immovable property in India other than agricultural land, plantation property or farmhouse provided:
- a clearance from the Government of India, Ministry of External Affairs is obtained for such purchase or sale, and
- the consideration for the acquisition of immovable property in India is paid out of funds remitted from abroad through a banking channel.
Important Points To Consider
First, it’s important to be aware of the restrictions on foreign ownership. As explained above, foreigners are only allowed to purchase property for commercial purposes, such as office space or retail outlets, residential properties are generally off-limits.
That said, there are a few exceptions to this rule. So it’s always best to check with the local authority or lawyer before making any purchase.
Secondly, it’s important to have a realistic budget in mind. Prices in India’s major cities have been skyrocketing in recent years, and they show no signs of slowing down. If you’re not careful, you could easily end up overpaying for your property.
Finally, don’t forget about due diligence. Foreigners buying property in India should make sure to do their research and visit the site in person. There are a lot of scams in India’s real estate market, so it’s important to be cautious and go through trusted agents.
Frequently Asked Questions
Should NRI/PIO file any document with RBI for purchasing a property?
No. An NRI / PIO who has purchased residential/commercial property under general permission is not required to file any documents with the Reserve Bank.
Can a foreign national of non-Indian origin be a second holder of immovable property purchased by NRI/PIO?
No, a foreign national of non-Indian origin cannot be the second holder of such property.
Can a foreign national of non-Indian origin lease property in India?
A foreign national of non-Indian origin may take residential accommodation on lease provided the period of lease does not exceed five years. In such cases, there is no requirement to take any permission or report to the Reserve Bank.
Is there a restriction on buying agricultural property in India?
An NRI or OCI is not allowed to acquire agricultural land, plantation property, or farmhouse.
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