As a law firm specializing in Indian laws and regulations, we opine on Section 6 of the Foreign Exchange Management Act (FEMA),1999, which deals with the Restrictions on acquisition, holding, transfer or disposal of immovable property situated in India by a person resident outside India.
According to FEMA, any individual who is not considered to be a “person resident in India” under section 2(v) of FEMA can acquire and hold immovable property in India only if it is for their own residential use or business purposes. Additionally, they are required to obtain approval from the Reserve Bank of India (RBI) before acquiring or transferring any such property.
The RBI has issued several notifications clarifying its stance on this issue; one example being Notification No.FEMA/21(R)/2015-RB dated October 27th 2015 provides that NRIs may purchase any residential/commercial property without prior permission from RBI, however agricultural land/farm house/plantation cannot be acquired without specific approval.
As far as case laws are concerned there have been many cases regarding interpretation of various provisions relating to foreigners owning immoveable properties.The case Mohammad Hanif Quareshi v State Of Bihar And Ors AIR 1958 SC731 was one of the earliest judgments wherein it was held that restrictions imposed by Art.19(1)(f) do not extend to non-citizens and therefore foreign nationals could acquire property within the territory of India regardless of whether he obtained citizenship under Article 5 or an eligible voter under Article 326.However ,later judgments like Satwant Singh Sawhney & Ors v D Ramarathnam Asst Passport Officer&Anor [AIR1967SC1836] put some limitations on freedom given above when dealing with other rights related issues
Regarding Non Resident Indians who wish to invest in properties located within India ,they are governed by different rules than for a foreign nationals. Additionally, the Reserve Bank of India (RBI) has also relaxed the rules for NRIs, allowing them to purchase any residential/commercial property without prior permission from RBI. NRIs can also inherit properties and repatriate funds into their respective countries after selling such properties.In case of inherited property by NRI ,provisions of FEMA allow him to retain it without seeking prior approval from RBI.
Furthermore, in recent years, the Indian Government has taken steps to encourage investment by Non Resident Indians in Indian Real Estate market .For example,the government has further liberalised FDI norms upto 100% through automatic route subject to certain conditions.The central government is also working on simplifying procedures related to real estate investing in India for non resident indians
In conclusion, Section 6 of FEMA places restrictions on acquisition and holding immovable property situated in India by an individual who is not considered a “person resident in India.” For Non Resident Indians investiing under this category special provisions apply which have been eased over time as part of measures aimed at promoting investments within the country.We recommend seeking expert guidance before making an investment decision involving real estate or other assets based within India.