Country Buying Guides - India

The conveyancing process

• Independent Lawyer
It is essential to use an independent lawyer with a legal knowledge of both the English and Indian legal systems, who are able to translate the documents and explain the terms to your full understanding.

• Due Diligence
It is important to carry out due diligence on the property you are purchasing in order to ensure there are no encumbrances on the property and that Title Deeds and such are in order. Your lawyer will do this on your behalf.

• Foreign Nationals
Indian property ownership laws vary depending on your visa and residential status and your country of origin. Foreign Nationals, of non-Indian origin are permitted by the Reserve Bank of India (RBI), to purchase fixed property in India provided that, the property is for residential use only, the funds for the purchase are met from the foreign exchange sent from abroad through normal banking means in any convertible currency, and that any income received from the property, is credited to the Ordinary Non-resident Rupee (NRO) account of the purchaser. Your lawyer will be able to guide your through these requirements and help you with the formalities involved.

• A non-resident Indian (NRI) and Person of Indian Origin (PIO)
An NRI, is an Indian Citizen resident outside of India, a PIO has either held an Indian passport or whose father or grandfather was a citizen. Providing the NRI.PIO is not a citizen of certain countries, they can purchase property. Companies registered in India, and Adult Indians can also purchase. An NRI/PIO can transfer by gift property to any NRI/PIO, however only an NRI can sell to a non resident of India, restricting a PIO. The above transactions are subject to RBI approval. A NRI/PIO may transfer by gift, and the NRI only can sell property to Resident Indian Citizens, NRI’s, Person resident outside India who is a citizen of India, PIO resident outside India or Resident Foreign Citizens. A PIO can sell to persons resident in India, and a person resident of India who is a citizen of India.

• The Residency Requirement
To acquire property in India, legally, you must fulfil the ‘residency requirement’; you must prove that you have spent more than 182 days during the course of the financial year in India. The reason for your stay must be either.

o Taking up employment in India.
o Continuing a business or vocation in India
o Any other purpose which would indicate your intention to stay in India for an uncertain period.

Many foreign nationals of non-Indian origin have purchased in India on a five-year lease, but hold no title until they apply for residency. However a new visa limiting stays to 180 days may affect anyone planning on doing this.

• Proof of Residency
The proof required can be produced through your passport and the residential permit, or other such documents. Once your residential requirement had been fulfilled there is no further authorisation needed from anybody. If you are unable to meet the ‘residency requirement’, in the short term, you can enter into an agreement to purchase with the Vendor, enabling you to lease the property until you are able to meet the requirement

• Forming a Company
Another way to buy property in India is through a private limited company. This is a very simple way to purchase although this can be very time consuming and expensive. If, at a later date, you decide to obtain your residency, then you can transfer the Deeds from the company into your name. To form a company you must have a minimum of two persons as Directors and Shareholders. A person resident outside India can also establish a branch office for carrying out business in India, and can then acquire certain property in India, which is necessary for carrying out business. This is done by obtaining permission from RBI and filing a declaration in form IPI with RBI within 90 days from the date of purchase. However this loop hole is due to close soon. The Indian government now require a non national to prove their business activities if you buy property as a company.

• Inheritance
There is no inheritance or gift tax in India, although the recipient of assets is subject to wealth tax; however a non resident is unable to receive Indian properties limiting your choice of heir.

• Costs and Taxes
In India Stamp duty is the responsibility of the purchaser, unless your agreement states otherwise and varies in amount from state to state ranging from 4% – 10%. The tax must be under the same name as is stated in the documents attracting the tax. It is calculated on the market value of the property at the date it was purchased.

In Assocation With The International Property Law Centre LLP