LRS scheme on purchase of immovable properties outside India

Purchasing property is not only an investment opportunity, but also a necessity in order to find a place to live or establish a business. As a result, the need to purchase property continues to arise for one or more people. The boundaries, rules, and regulations for purchasing property in India while a resident of India are quite clear. However, the need to buy property outside India continues to arise in a variety of situations such as a resident individual relocating outside India, an investment opportunity outside India, a business entity establishing a presence outside India, and many others. In following information you will get to explore the possibilities of purchasing immovable property outside India  while being a resident.

Purchase of Immovable Property outside India by Resident Individuals

• A person residing in India may possess, own, transfer, or invest in any immovable property located outside of India if the property was bought, held, or owned by the person while residing outside of India or was inherited from a person residing outside of India, according to section 6(4) of the FEMA.

Under the Liberalized Remittance Scheme (LRS), a person can remit money to buy real estate outside of India. If family members pool their money to buy a house, the house should be registered in the names of all the family members who send money.

Application of restrictions on transferring property outside India

• Restrictions of transferring property outside India does not apply to –

1. The resident who is a foreign national
2. The property was acquired before July 8, 1947, and continued to be held after obtaining permission; or
3. If it is acquired on a lease not exceeding five years.

Acquisition of Immovable property outside India

• Immovable property can be acquired outside India-

1. As an inheritance/ gift from a person

• referred to in sec 6(4) of FEMA; or
• who has acquired it prior to July 8, 1947
• who has acquired such property in accordance with the foreign exchange provisions in force at the time of such acquisition.

1. Purchased with balances in the Resident Foreign Currency (RFC) account of the resident.
2. As a gift from persons at (b) & (c) above, provided he is a relative of such persons.
3. Purchased with remittances made under the Liberalised Remittance Scheme (LRS).
4. Jointly with a relative provided there are no outflow of funds from India.
5. By an Indian company having overseas offices, for housing its business or for residence of staff.

Acquisition of Immovable property by Non-Resident Indian (NRI) and Overseas citizen of India

• NRI and OCI may

1. Purchase immovable property in India other than agricultural land or farmhouse or plantation property from a person resident in India or from NRI or from an OCI.
2. acquire immovable property in India other than agricultural land or farmhouse or plantation property by way of gift from a person resident in India or from NRI or from an OCI, who in any case is a relative as defined under Companies Act,2013.
3. Acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property: –

• In accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these rules or
• From a person resident in India

1. Transfer any immovable property in India to a person resident in India.
2. Transfer any immovable property other than agricultural land or farmhouse, or plantation property to an NRI or an OCI

Mode of Payments for acquisition of property in India

• Immovable property purchases must be made through banking channels in India and are subject to payment of all applicable taxes, tariffs, and levies.
• The payment may also be made using money from NRE, FCNR(B), NRO, or NRO accounts held by NRIs or OCIs.
• Paying with traveler’s checks and foreign currency notes is not advised.

Acquisition of property in India by Foreign Embassies/ Diplomats/ Consulate Generals 

• If the following conditions are met, a foreign embassy, diplomat, or general consulate may buy or sell immovable property in India (other than farmland, plantation property, or other similar types of land):

1. For such a purchase or sale, authorization is obtained from the Ministry of External Affairs of the Government of India, and
2. Money sent from overseas through banking channels is used to pay the consideration for buying real estate in India.

Acquisition of property in India by foreign nationals

• Regardless of their residency status, nationals of the Democratic People’s Republic of Korea (DPRK), Macau, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Pakistan, or Bangladesh cannot purchase or transfer real estate in India other than on lease, not exceeding five years. An OCI shall not be subject to this prohibition.
• Except for the 11 nations indicated at (a) above, foreign nationals of non-Indian descent who are residents in India may purchase immovable property.
• Foreign nationals of non-Indian ancestry who reside outside of India may purchase or transfer real estate in India on a lease of no more than five years or may inherit real estate from a resident.
• All other acquisitions/ transfers by foreign nationals will require the prior permission of RBI**.

Acquisition of property in India by Long term visa (LTV) holder

• Citizen of Pakistan, Bangladesh or Afghanistan belonging to minority community (Hindu, Christian, Sikh, Parsi, Buddhist, Jain) in that country and residing in India who has been granted an LTV by the Central government can purchase only one residential immovable property in India as dwelling unit for self-occupation and only one immovable property for carrying out self-employment.
• However, such acquisition is subject to the conditions as specified under Rule 28 of Foreign Exchange Management (Non-Debt Instrument) Rules, 2019.

Repatriation of sale proceeds of immovable property in India by Non-resident

• The sale proceeds of such property cannot be repatriated by the person who acquired it under Section 6(5)iv of the FEMA or by his successor without RBI clearance.
• For NRIs/ PIOs and foreign nationals (aside from Nepal/ Bhutan/ PIO) who have
• inherited from a person referred to in section 6(5) of FEMA,
• retired from employment in India, or
• are non-resident widows/ widowers and have inherited assets from their deceased spouse who was an Indian national resident,

repatriation of up to USD 1 million per financial year is permitted along with other assets.

• The following requirements must be met in by NRIs and PIOs in order to transfer the sale proceeds of immovable property (other than agricultural land, farmhouses, or plantation properties) in India:
• The immovable property was bought in compliance with the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations 2018 or the terms of the foreign exchange law in effect at the time of acquisition;
• The purchase price of the property was paid in foreign currency obtained through banking channels, money held in a non-resident foreign currency account, or money maintained in an external non-resident account;
• The repatriation of sale earnings from residential property is limited to a maximum of two such properties.

** This is the comprehensive information about the LRS on immovable properties purchased outside India . However, there are other areas that needs to be taken care of before and after purchasing the property outside India. For more queries , you can take professional advise form us. Feel free to contact us.