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| Home > Real Estate, Wills, Probate and Trust > Real Estate in India- An Attractive Venture For Non-Residents Indians. |
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| Nature of Transactions |
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Nature of Transactions under the Transfer of Property Act:
The Transfer of Property Act, 1882 describes the modes by which the immovable property may be transferred by a person in favour of another person. This Act provides for following kinds of transfer:
- Sale
- Mortgage
- Lease
- Gifte and
- Exchange
Sale:
A non-resident Indian and a Person of Indian origin cannot acquire/purchase agricultural property/plantation property and farm house. There is no restriction on their purchasing residential and commercial properties.
Where the seller of agricultural/plantation/farm house is a non-resident Indian/PIO the property may be sold by him only to Indian citizens residing in India. Commercial and residential properties may be sold to PIO's and NRI's irrespective of their residence. A foreign national can buy residential or commercial properties only that too when he is a resident of India.
Where the seller of an agricultural/plantation/farm house is a foreign national (other than a PIO), the same may be sold only to Indian citizens resident in India. Residential and commercial properties may however be sold to to PIO's and NRI's irrespective of their residence. A foreign national can buy residential or commercial properties only that too when he is a resident of India.
Mortgage:
Transactions of loans and advances in Indian currency between a person resident in India and a person resident outside India are governed by FEMA.
A general permission has been granted by the RBI to certain financial institutions providing housing finance in India to grant housing loans to NRI's for acquisition of a house for self occupation subject to following conditions:-
- The house/flat would be used for self occupation by the non-resident on return to India and not for any other use;
- The quantum of loan, margin money and the purpose of loan will be at par with those applicable loans being granted to residents;
- The loans should be fully secured by creating equitable mortgages of the property and if necessary, lien on borrower's other assets in India.
- Repayment of loan should be made by the borrower within a period not exceeding fifteen years and in installments comprising principal and interest including all charges by remittances from abroad through normal ban king channels or out of funds in his/herNRI/FCNR/NRO account in India.
- if the house/flat is rented out, the entire rental income, if it is more than the prescribed installment, should be adjusted towards repayment of the loan. If the rental income is less than the installment, the borrower should remit the shortfall amount from abroad or pay the difference of his/her NRE/FCNR/NRO account in India.
Lease:
Transfer of an immovable property by way of lease is perhaps the most commonly utilized mode of transfer. Lease in common expression can be understood as transaction of letting an immovable property on rent. The person who lets the property is known as the landlord and the person who occupies the property is known as tenant. The tenant in a transaction of lease, acquires only the right to enjoy/use the premises, the ownership continues to vest in the owner of the premises. A tenant can enjoy the occupation of property till the time the landlord wants him to enjoy; thereafter the landlord has the right to seek the eviction of the tenant by following the due process of law.
The laws of eviction of tenants are divided into the following two categories:
- Where the tenants have the protection of rent control legislations;
- Where the tenants do not have the protection of rent laws.
The rent control laws, which provide protection to the tenants, are made by the respective state governments. The tenants who are the protected tenants by the rent control legislations cannot be evicted without the satisfaction of the rent controller. The rules of acquisition as stated in the transaction of sale are applicable to transaction of lease with one exception that citizens of Pakistan, Bangladesh, China, Sri Lanka, Afghanistan, Iran, Nepal, and Bhutan cannot have lease of an immovable property, the duration of which is more than five years, without the permission of Reserve Bank of India.
Gift:
Gift has been defined as the transfer of the certain existing moveable or immoveable property, which is made voluntarily and without consideration, by one person to another. The person who transfers the property is called the donor and the person in whose favour the property transferred is called the donee. Acceptance of the gift by the donee during the life time of donor is a pre-requisite of gift.
A transaction of gift should be done:
- by registered instrument;
- be signed by or on behalf of the donor;
- be attested by at least two witnesses.
Where a person of Indian Origin is the donor he is permitted to transfer by way of gift all kind of properties mentioned above. However, there is a restriction with regard to donee in respect of agricultural/plantation/farm house property. The donee has to be an Indian citizen and person resident in India. The residential and commercial properties may however be transferred by a PIO donor to any Indian citizen or PIO irrespective of their residents a foreign national may be the donee in respect of commercial and residential properties, if he is a resident of India. The same is the position with regard to a non-resident Indian donor.
Where a donee of an immoveable property is a NRI or a Foreign National resident of India, he is permitted to remit an amount up to one million US dollar, per calendar year arising out of sale of the gifted property. The remittance is permitted only in regard to sale of residential or commercial property. Since and NRI or a PIO is not permitted to be the donee in regard to agricultural property plantation property/farm house, there is no provision for remittance and sale of such property.
Exchange:
A transaction of exchange is similar to a transaction of sale; the only difference between the two transactions is that in a transaction of sale the consideration for the immovable property is valued and paid in money, whereas in a transaction of exchange, the consideration is paid in kind and not in money.
The laws applicable to FEMA qua the transaction of exchange are similar to those of transaction of sale. Readers may refer to the chapter of sale to understand the import of the involvement of foreign exchange in transactions of exchange.
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