1 What laws govern immovable property acquisitions by foreigners in India?
The primary laws are:
The Foreign Exchange Management Act, 1999;
The Foreign Exchange Management (Non-debt Instruments) Rules, 2019 (the NDI Rules); and
Reserve Bank of India (RBI) regulations and directions on transfer of immovable property.
2 Can a non-resident foreign national of non-Indian origin purchase immovable property?
Foreign nationals of non-Indian origin, resident outside India, can acquire or transfer immovable property in India, on a lease not exceeding five years, and can acquire immovable property in India by way of inheritance from a resident.
All other acquisitions or transfers by foreign nationals will require the prior permission of the RBI.
3 Can a foreign national, resident in India, purchase immovable property?
Yes, a foreign national, resident in India, can purchase immovable property, provided they are not from a restricted nationality and fulfil any requirements prescribed by other authorities, if any, including the relevant state and municipal governments.
4 Are there any nationality-based restrictions investors should screen upfront?
Yes, citizens of the below countries, irrespective of their residential status, require prior RBI permission to acquire or transfer immovable property:
Pakistan;
Bangladesh;
Sri Lanka;
Afghanistan;
China;
The Democratic People’s Republic of Korea (North Korea);
Nepal;
Bhutan;
Macau;
Hong Kong; and
Iran.
5 Can an office of a foreign company purchase immovable property?
Yes, provided:
It has established a branch office or other place of business (excluding a liaison office) in India, in accordance with the RBI regulations;
Such purchase is necessary for or incidental to carrying on such activity; and
Liaison offices can acquire property by way of a lease not exceeding five years.
Such a property can also be mortgaged with an authorised dealer bank as security for other borrowings.
6 Which immovable properties are generally restricted for ownership by non-residents?
The restricted immovable property types are:
Agricultural land; and
Plantation property and farmhouses.
7 How must payment and reporting of immovable property acquisitions be conducted?
Payment and reporting must be done by way of:
Foreign inward remittance through a proper banking channel; and
A declaration in Form IPI should be filed with the RBI within 90 days from the date of acquiring the property.
8 Can a foreign company sell such property on winding up?
Yes, and upon such winding up of the business, the sale proceeds of the property can be repatriated only with the prior approval of the RBI.
9 What key constraints apply to immovable property acquisition through Indian companies?
A foreign investor invests in an Indian company under the NDI Rules, and the Indian company acquires or leases land as a business input. Key constraints for such an acquisition are:
Purpose of ownership – the operating business must be eligible for foreign investment, and the landholding should be linked to that purpose; and
Real estate business restriction – foreign investment is restricted where the Indian entity is engaged, or proposes to engage, in real estate business, the construction of farmhouses, or trading in transferable development rights.
10 What key considerations should foreign entities assess before purchasing immovable property?
Key considerations include:
Special economic zones (SEZs) – SEZs provide favourable taxation and customs treatment that can enable shorter turnover periods;
Land due diligence – proper due diligence should be conducted before an acquisition, as land is often a highly disputed subject;
Understanding state laws and incentives – due to India’s quasi-federal structure, different states have different laws and can also provide differing incentives based on their objectives; and
Purpose – the purpose and requirements of the business are fulfilled when setting up.
