As a general rule no resident person is permitted to acquire or transfer any immovable property situated  outside India without general or special permission of the Reserve Bank of India.       

   Acquisition
   The general rule is, however, subject to following exceptions in which cases property can be acquired or held  outside India without prior approval :-
          a) by a person who is a foreign national
          b) by a person who already held property since 8th July 1947. He can continue to hold such property abroad.
          c) acquisition by way of gift or inheritance from - 
                 i)  person who acquired, held or owned the property when he was non resident; or
                 ii)  person who acquired it prior to 8-07-1947 and continued to hold the same.
          d) acquisition out of foreign exchange held in RFC a/c. maintained as per relevant regulations.
            
        Acquisition in all other cases will require prior approval of R.B.I.

   Transfer
   Property acquired by a resident person or held by him as per the regulations applicable to acquisition mentioned above cannot be transferred without RBI approval except by way of gift to a resident person who is his relative.
          Relative for this purpose has been defined to mean husband, wife, brother, sister or any other lineal ascendant or descendant of the transferor. 

C.  Foreign Direct Investment in Real Estate
          India being an emerging market and housing being an upcoming sector, the international community is likely to have a positive attitude in respect of investment in housing sector. Appreciating the need for foreign investment in the sector and simultaneously with a cautious approach to avoid speculative tendencies, the FDI policy provides for 100% foreign participation by NRIs/OCBs in housing and real estate development sector in listed areas. These areas are

         (a)     development of serviced plots and construction of residential premises.
          (b)     construction of residential and business premises including business centres and offices.
          (c)     development of townships
          (d)    city and urban infrastructure facilities
          (e)     manufacture of building material
          (f)     participatory ventures in (a) to (e) above
          (g)     investment in housing finance institutions.

          The Union Cabinet in its meeting held on 9th May 2001, permitted 100% FDI for development of township subject to FIPB clearance. Development of integrated townships include housing, commercial premises, hotels, resorts, city and regional level urban infrastructure facilities such as roads and bridges, mass rapid transit systems and manufacture of building materials. Development of land and providing allied infrastructure also form an integrated part of townships development. FDI for integrated townships is subject to following conditions :-

          a)     The foreign company should be registered as an Indian company.
          b)     The core business of the Company should be integrated township development with a record of successful execution of such projects elsewhere
          c)     The minimum area to be developed should be 100 acres for which norms and standards as per local laws should be observed. In the absence of local law, a minimum of 2000 dwelling units for about 10000 population will need to be developed.
          d)     The minimum capitalisation norm shall be US$10 million for a WOS and US$5 million for JVs.
          e)     A minimum lock-in period of three years from completion of minimum capitalisation should be there before repatriation of original investment
          f)      A minimum of 50% of integrated project development should be completed within a period of 5 years from the date of possession of the first peace of land.

          For companies investing in SEZ, Foreign Investment Promotion Board may accord exemption to any of the above mentioned conditions on case-to-case basis.

          On the recommendation of the steering committee on FDI known as N. K. Singh committee the govt. is seriously considering 100% participation in housing and real estate development sector for all non-residents. These recommendations, when accepted, is expected to open up the gate for significant foreign inflow in this sector.

    Funding of Investment
    Earlier the External Commercial Borrowing (ECB) policy did not permit the end use of ECB funds in two areas-stock market and real estate. Investment was required to be entirely financed by equity. Considering the need for borrowed funds in the sector, the Ministry of Finance has in the month of July decided to liberalise the ECB regime for funding real estate projects particularly integrated townships, subject to special permission on a case-by-case basis to rule out speculation in reality market by foreign investors and lenders. Development of land and providing allied infrastructure is envisaged to form an integrated part of the township's development. Apart from ECB permitted for real estate sector a resident person is allowed to borrow by way of loan or overdraft or any other credit facility from a bank outside India for execution of any turnkey project or for civil construction contract.

            A further liberalisation is made by allowing unlimited prepayment of ECBs until March 31st, 2003 which will enable the developers to reduce the cost of borrowing whenever possible.

March 2003

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