POV on correction and bubble burst in realty sector

1. I do agree the prices in Delhi have softened a bit owing to freehold and lease hold confusion and not because of scarcity of money. There is no dreath of money yet.

2. The stabilization of prices and a dip in prices is always a healthy sign. This means real estate is consolidating at a certain price and taking a breadth for a next big leap. The more time spent in consolidation zone means a bigger leap. The theory here is simple in such a scenario the inventories which are in weak hand move to stronger hands and then command better premium.

3. In Gurgaon the flats market never come down in terms of prices. There is hunger for flats as lot for end users want to move in there own houses. I was amazed to know that people have moved in Tulip Ace on Pataudi Road where still the infrastructure needs to catch-up.

4. I have also realized that people from all parts of country and world have investments in GGN. With Dollar appreciating 20% in last few months lot of NRI’s have invested in GGN recently. They have made down paymnents in most of the cases there by having a direct benefit of 32%. Dollar at an all time high in my view, this has brought in lot of money into India.

5. Interest rates are going to and will have to soften in next few months, which will bring more home loan takers back into real estate.

I have seen these kind of phases and negative people scaring the positive people with statements like ‘World is going to be over’. This is not going to happen and if it happens even people who are not invested in RE will be impacted.

Net Net this is a great time and in my view a time to buy right set of properties at right price.

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NRI real estate investment norms simplified

The purchase and sale of immovable properties in India by a Non Resident Indian (NRI) or by a Person of Indian Origin (PIO) is really a very simple and easy affair with not much hassles and problems. For a detailed and authentic answer one should always refer to the Foreign Exchange Management (Acquisition and Transfer of Immovable Properties in India) Regulations, 2000 as amended from time to time.

The above regulations have been notified by the Reserve Bank of India vide Notification No. FEMA/21/200-RB dated 3rd May, 2000. Likewise, to get a latest update on the subject the readers may also very carefully go through the latest Master Circular on Acquisition and Transfer of Immoveable Property in India by Non Resident Indians/Persons of Indian Origin which has been issued by the Reserve Bank of India vide Master Circular No.4/2012-13 dated 2/7/2012.

Before going further to analyse the different provisions of the law relating to acquisition and transfer of immovable properties in India by Non Resident Indians as well as by Persons of Indian Origin it would be worthwhile to know and understand the legal definition of these two entities as per the Foreign Exchange Management Act.
As per Notification FEMA-5 /2000 dated 3.5.2000 as amended from time to time, a Non Resident Indian (NRI) is a person resident outside India who is citizen of India or is a person of Indian Origin. Likewise, the definition of Person of Indian Origin (PIO) means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who (i) at any time, held Indian passport, or (ii) who or either of whose father or whose grandfather was a citizen of India by virtue of Constitution of India or the Citizen Act, 1995.

With regard to acquisition and transfer of property in India by an Indian Citizen resident outside India it is specifically provided that a person resident outside India who is a citizen of India may –

a) acquire any immovable property in India other than agricultural/plantation /farm house, and b) transfer any immovable property in India to a person resident in India. c) transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India.

As regards the Acquisition as well as transfer of Property in India by a Person of Indian Origin (PIO) the Regulation 4 of the above mentioned regulation specifically states that a person of Indian origin resident outside India may –

(a) acquire any immovable property other than agricultural land/farm house/ plantation property in India by purchase, from out of (i) funds received in India by way of inward remittance from any place outside India or (ii) funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank under the Act; (b) acquire any immovable property in India other than agricultural land / farm house / plantation property by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India; (c) acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India; (d) transfer any immovable property in India other than agricultural land/farm house/plantation property , by way of sale to a person resident in India; (e) transfer agricultural land/farm house/ plantation property in India, by way of gift or sale to a person resident in India who is a citizen of India; (f) transfer residential or commercial property in India by way of gift to a person resident in India or to a person resident outside India who is a citizen of India or to a person of Indian Origin resident outside India.

The rules relating to repatriation of the sale proceeds of property held in India is also very simple. Regulation No.6 of the above regulations contains very detailed guidelines with reference to repatriation. It is provided in this regulation that in the event of sale of immovable property other than agricultural land/farm house /plantation property in India by a person resident outside India who is a citizen of India or a person of Indian origin, the authorised dealer may allow repatriation of the sale proceeds outside India, provided the following conditions are satisfied, namely:

(i) the immovable property was acquired by the seller in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations; (ii) the sale takes place after three years from the date of acquisition of such immovable property or from the date of payment of final installment of consideration for its acquisition , whichever is later; and ; (iii) the amount to be repatriated does not exceed (a) the amount paid for acquisition of the immovable property in foreign exchange received through normal banking channels or out of funds held in Foreign Currency Non-Resident Account or (b) the foreign currency equivalent, as on the date of payment, of the amount paid where such payment was made from the funds held in Non-Resident External account for acquisition of the property; (iv) in the case of residential property , the repatriation of sale proceeds is restricted to not more than two such properties.

It may also be noted that citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan have been prohibited from acquiring and transferring immovable property in India without the prior permission of the Reserve Bank of India.

The Master Circular of the Reserve Bank of India dated 2nd July 2012 clearly states that a NRI can acquire by way of purchase any immovable property (Other than agricultural land/plantation property/ farm house) in India.

Likewise, an NRI may transfer any immovable property in India to a person who is resident in India. He may transfer all immovable properties except agricultural land, plantation property or a farm house to any Indian citizen resident outside India as also to a PIO resident outside India.

For purchase of the above property NRI can make payment by way of funds received in India through normal banking channels by way of inward remittance from any place outside India or by debit to his NRE/FCNR (B) and NRO account. Similarly, such payments for purchase of properties in India cannot be made by traveller’s cheque or by foreign currency notes. The NRI’s would be happy to note that for purchase by them of commercial property under this above general permission they are not required to file any documents with the Reserve Bank of India.