RBI : Acquisition & Transfer of Immovable Property in India

Legal Framework Related to Acquisition & Transfer of Immovable Property in India

Acquisition & Transfer of Immovable Property in India is Governed by Section 6(3), (4), (5) of FEMA, 1999. Moreover, the Acquisition & Transfer of Immovable Property in India is Implemented through Notification FEMA 21/2000-RB (as amended) and RBI issues master circulars for operational guidance to AD Category-I banks ((FEMA 21/2000-RB – Practical Compliance Summary)

Non-Resident Indian (NRI)

Purchase : NRIs may purchase residential or commercial property in India, but NRIs are not permitted to acquired any agricultural land/plantation property/farmhouse.

RBI issues master circulars for operational guidance  & FEMA rule for transfer.

• NRI Can sell any property to a resident Indian : NRI Can sell residential/commercial property to Indian citizen resident outside India & PIO resident outside India
• Agricultural / plantation / farmhouse: not transferable to NRIs/PIOs

Mode of Payment

• RBI operational guidance & FEMA rule for Transfer Allowed sources are inward remittance through banking channels & debit to NRE / FCNR(B) / NRO accounts. However RBI operational guidance & FEMA rules for Transfer Not allowed: cash, traveler’s checks, or foreign currency notes.
• RBI Reporting : No RBI reporting required for purchase under general permission

Person of Indian Origin (PIO)

• Purchase : Rules related Person of Indian Origin are Same as NRI like Residential & commercial permits. However, agricultural/plantation/farmhouse properties are not permitted.

• Gift / Inheritance : Person of Indian Origin Can receive property (except agricultural etc.) by gift from Resident Indian, NRI, Person of Indian Origin.  They Can inherit any immovable property (including agricultural land)

• Transfer

• • Residential/commercial property Sale to resident Indian
  • Gift to resident Indian / NRI / PIO
  • Agricultural land / farmhouse / plantation: Sale or gift only to resident Indian citizen

• Payment Rules : Same as NRI (banking channels / NRE / FCNR / NRO)
• RBI Reporting : No reporting required if acquired under general permission

Foreign Embassies/Diplomats/Consulates

• Foreign embassies/diplomats/consulates may purchase or sell (excluding agricultural land) only if MEA approval obtained & payment is made via foreign remittance through banking channels

Foreign Companies/Branches/Project Offices

A person resident outside India who has established a branch/office/project office (not a liaison office) may Acquire immovable property necessary for business . Foreign Companies / Branch / Project Offices who is A person resident outside India must File Form IPI with RBI within 90 days. & Comply with all applicable FEMA & sectoral laws. May mortgage property to AD bank as security

Repatriation of Sale Proceeds while Property Purchased

• Property Purchased Using Foreign Exchange : Property Purchased Using Foreign Exchange repatriation is allowed subject to property acquired as per FEMA, and repatriation is limited to the amount paid in foreign exchange or the amount paid from the NRE/FCNR account. Maximum two residential properties
• Property acquired via inheritance, legacy, & rupee funds (NRO) then repatriation up to USD 1 million per financial year requires documentary proof and an income-tax NOC.
  • Above USD 1 million → RBI approval required
  • Multiple remittances must be through same AD bank

Refund of Property Booking Amount

A refund (with interest, net of tax) allowed to NRE / FCNR(B) account Only if original payment was made from NRE / FCNR(B) account, or a foreign inward remittance and AD bank must verify bonafides

Restricted Nationalities

Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan: They Cannot acquire or transfer immovable property however Lease permitted up to 5 years, Otherwise RBI prior approval mandatory for Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan acquire or transfer immovable property.

Foreign Nationals of Non-Indian Origin

• Resident Outside India: Foreign Nationals of Non-Indian Origin cannot purchase property however, foreign nationals of Non-Indian Origin Can inherit from resident Indian, & they allowed to lease property for up to 5 years.
• Becoming Resident in India (FEMA): NRI Becoming Resident in India may purchase property if residential status under FEMA is satisfied & the visa indicates intention to stay in India for an uncertain period.
• It is to be notes that Property acquired with RBI approval cannot be transferred without RBI permission

Form IPI – Key Compliance

Applicable to foreign entities with a branch/project office acquiring property. & basic key points that RBI Filing must be within 90 days, Submitted to RBI Mumbai, & Not applicable to NRIs / PIOs purchasing under general permission

Practical Compliance Checklist

This RBI circular is frequently cited during bank scrutiny, remittance approvals, Form 15CA/CB certification, and property sale transactions involving NRIs. Errors in eligibility or repatriation limits often lead to blocked remittances. Following are Practical Compliance Checklist

• Verify residential status under FEMA
• Check property type (agricultural restrictions)
• Validate source of funds
• Track repatriation limits (USD 1 million rule)
• Ensure correct transferee eligibility
• Obtain MEA/RBI approvals where required
• Maintain property acquisition documentation
• Coordinate tax clearance for remittances