RBI to allow Non-Resident Indians to purchase property in joint with foreign spouse

Non-resident Indians (NRI) with hopes to purchase property in India in joint with their spouse holding foreign passports may soon be allowed to do so.

The Reserve Bank of India has plans to relax the restrictions under the Foreign Exchange Management Act (FEMA), which currently make such acquisitions difficult.

At present, if an NRI wishes to purchase a house or any other real estate as a joint property with a foreign citizen spouse, it is processed specially, requiring prior permission from the Reserve Bank of India (RBI) on a case-by-case basis.

However, RBI executive director, G. Padmanabhan commented he has requested for a review of these rules. This is an issue requiring examination in consultation with the Government of India. Padmanabhan has also directed a comprehensive review of FEMA 21(notification) under which such transactions are processed.

Furthermore, there has been an increase in such applications. However, due to each requiring specific permission from RBI, the process can be lengthy.

The regulation referred to is Notification No. FEMA 21/2000 specifying the rules permitting an NRI or a Person of Indian Origin (PIO) acquiring immovable property in India, with the exception of agricultural land, farm house or plantation property.

The rules also apply to foreign companies permitted to establish a branch or project office in India provided the purchase is essential in order to continue business.

However foreign nationals, even if married to an NRI, are unable to purchase immovable property in India, unless proof is provided that s/he has been a ‘resident of India’ as per FEMA rules. With renewed interest towards Indian investments, a number of NRIs have planned to purchase homes in India. However, the restrictions on foreign nationals mean the NRI has to purchase and plan to dispose of the property as the sole owner.