There is no ceiling on the number of immovable properties acquired or sold in India by NRIs and PIOs. However, NRIs/PIOs belonging to Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan require a prior approval of the Reserve Bank of India for acquiring Immovable Property in India.

It is mandatory to file a declaration of the acquired property with the Reserve Bank of India within 90 days of acquisition of property, on the prescribed Form – IPI 7.

IPI Forms

The Reserve Bank of India has issued IPI Forms for fresh acquisition and holding of Immovable Property in India by residents and Non Residents. The table below gives a brief applicability of IPI Forms.

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Non Resident Indians (NRIs), Persons of Indian Origin (PIOs), and Foreign Nationals of non-Indian Origin (Foreigners) can acquire Immovable Property as per the laws and legislations laid down by the Central Government.

Immovable Property Acquisition by NRIs and PIOs
NRIs and PIOs can acquire Immovable Property (either Residential or Commercial) in India by way of purchase, gift, inheritance, or share of joint property received upon partition of family/property, etc. as per the guidelines laid by the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000.

1. Acquisition by way of Purchase
2. Acquisition by way of Gift
3. Acquisition by way of Inheritance

Acquisition by way of Purchase

The Reserve Bank of India (RBI) has permitted the following categories of NRIs/PIOs to acquire Immovable Property (other than agricultural land, plantation or farm-house property) by way of purchase, provided the payment is made out of Foreign Exchange Inward Remittance or any Non Resident Bank Account in India, i.e., (Non Resident External (NR(E)), Foreign Currency Non Resident Account (FCNR(B)) or Ordinary Non Resident Rupee Account a/c (NRO) in connection with acquisition of Immovable Property in India:

• A Non Resident who is a citizen of India
• A Non Resident who is a Person of Indian Origin (PIO)
• A Non Resident who has established in India a branch office or other place of business (excluding a liaison) office

There are no restrictions on the number of residential/commercial properties that can be purchased.

Acquisition by way of Gift

General permission is granted to acquire any Immovable Property (other than agricultural land, plantation or farmhouse property) by way of gift from a person (donor) who is:

• A Person Resident in India, or
• A Person Resident outside India (NRI) who is an Indian citizen or foreign citizen of Indian origin.

Provided that applicable Gift Tax if any has been paid at the time the immovable property is being gifted.

Acquisition by way of Inheritance

General permission is granted for inheritance of Immovable Property including agricultural land, plantation or farm-house property from:

• A Person Resident in India, or
• A Person Resident outside India who may be an Indian citizen or Foreign Citizen of Indian Origin provided such person had acquired the said property in accordance with the provisions of Foreign Exchange Law in force at the time of acquisition, i.e., FERA, 1973 or FEMA 1999.

Hence, agricultural land, plantation or farmhouse property can be acquired by way of inheritance only.

Immovable Property Acquisition by Foreign Nationals of Non-Indian Origin

The residential status of a foreign national of non-Indian origin determines the ability to acquire immovable property in India. Thus, Foreign Nationals of non-Indian origin can be further divided into

• Foreign Nationals of Non-Indian Origin, Resident Outside India
• Foreign Nationals of Non-Indian Origin, Resident In India

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The Government of India, Ministry of Finance had announced a scheme of 1% interest Subvention on Housing Loan up to Rs.10 lakhs. An allocation of Rs.1,000 crores was also announced for the purpose. Pursuant to the above-mentioned announcement, the Government of India has approved a Scheme of Interest Subvention on Housing Loan up to Rs.10 lakhs, provided the cost of unit does not exceed Rs.20 lakhs. Department of Financial Services has issued guidelines for implementation of the Scheme.

The objective of the Scheme is to provide Interest Subsidy on Housing Loan as a measure to improve affordability of housing to eligible borrowers and generate additional demand for credit. The Scheme will be implemented throughout the country and will be in operation for a period of 1 year beginning Oct 1, 2009 and upto Sept 30, 2010. Interest Subsidy of 1% will be applicable for first 12 months of eligible loans sanctioned and disbursed during the currency of the scheme viz. Oct 1, 2009 to Sept 30, 2010.

It will be implemented through Scheduled Commercial Banks (SCBs) and Housing Finance Companies (HFCs) registered with National Housing Bank (NHB). The Reserve Bank of India (RBI) and NHB will be the nodal agencies for the Scheme for SCBs and HFCs respectively. After sanctioning and disbursing the eligible loans, the implementing agencies will claim disbursement of subsidy from respective nodal agency on monthly basis.

The budget for the year 2010-2011 was presented by the Hon’ble Finance Minister Pranab Mukherjee. At the outset, he took cognizance of three key challenges facing the economy today:

• The need to quickly revert to the high GDP growth path of 9 percent, and then find the means to cross the double digit growth barrier,
• The need to harness economic growth to consolidate the recent gains in making development more inclusive, and
• The need to check weaknesses in government systems, structures and institutions at different levels of governance.

According to the Finance Minister, there is one factor that can hold us back in realizing our potential as a modern nation; it is the bottleneck of the public delivery mechanisms. He further stated that the Union Budget cannot be a mere statement of government accounts but has to reflect the government’s vision and signal the policies to come in future. He further recognized that an enabling government does not try to deliver directly to the citizens everything that they need but instead, it creates an enabling ethos so that individual enterprise and creativity can flourish.

Specifically on the housing and urban sector, the Finance Minister proposed three key enhancements viz.

• The allocation for Swarna Jayanti Sharari Rozgar Yojana, a programme designed to provide employment opportunities in urban areas, shall receive a 75 percent increase in allocation, from Rs.3,060 Crores last year to Rs. 5,400 crore this year ( the allocation for housing urban poverty alleviation has also been increased from Rs.850 crore to Rs. 1,000 crore this year)
• The 1 percent interest subvention on housing loans upto Rs.10 lakhs where the cost of the house does not exceed Rs.20 lakhs has been extended for another year – upto 31 March, 2011 and
• The Rajiv Awas Yojana for slum dwellers and urban poor announced last year has received an increased allocation of over 700 percent, from Rs.150 crore last year to Rs. 1,270 crore this year.

On the Direct Taxes, the budget has proposed substantial relief to tax payers by broadening the tax slabs by completely exempting tax for income upto Rs. 1.6 lakh, 10 percent tax for income between Rs.1.6 and Rs.5 lakh, 20 percent for income between Rs. 5 lakhs and Rs.8 lakh and 30 percent for income above Rs. 8 lakh. This broadening of tax slabs is expected to increase the affordability of households substantially and a part of this affordability could feed into housing mortgages.

Further, to provide a one time relief to the housing and real estate sector which has been impacted by global recession, pending projects will be allowed to be completed within a period of 5 years (instead of four years) for claiming a deduction on their profits. Also, the norms for built up area of shops and other commercial establishments in housing projects have been relaxed so as to enable basic facilities for the residents.

On the environment side, the government has given several concessions in this budget for solar, wind and LED industries. Under the National Solar Mission, a 5 percent customs duty concession on machinery, instruments, equipment and appliances has been given. Further, these goods have also exempted from Excise Duty. Similarly, for wind energy plants, exemptions have been granted from central excise duty. For LED lights, Excise duty has been reduced from 8 percent to 4 percent. The implication of these proposals is that more environmentally conscious products are likely to emerge in the future.

While all these proposals have been completely growth oriented and are quite welcome, the budget has also proposed a Service Tax on ‘activity of construction’, thereby impacting real estate developers and the end price which the consumer has to pay. This may impact the price lines negatively. However, taking an overall view of the budget, it is a growth oriented budget and is likely to take the overall economy as well as the real estate industry forward.

The author is Founder – Chairman, National Association of Realtors – India (NAR-INDIA).

Emaar MGF Land Ltd that plans to hit the market with an initial public offer (IPO) soon, is under investigation by the Enforcement Directorate for alleged violations of foreign direct investment norms (FDI). The Enforcement Directorate believes the company diverted some of the FDI meant for real estate, into ‘barred’ sectors, including agricultural land. The ED found that the company brought FDI worth Rs7,000-crore into India between 2005 and 2008, purportedly to invest in real estate.  The company had on February 1, 2008 hit the market with an issue of 10.25-crore shares in a price band of Rs610-690 each to raise Rs7,000-crore but was forced to withdraw the issue after failing to find takers despite extending the closing date from February 6 to February 11 and reducing the price band from Rs 610-690 to Rs530-630. Now, with the investor sentiment gradually returning to normalcy, Emaar MGF is ready to hit the primary market again. The ED action comes just when it has filed the red herring prospectus with the SEBI for the second time, to raise up to Rs3,800-crore, nearly half the amount it had planned to raise earlier.