Registration of real estate properties is an essential part of any purchase process. Any registration done in the right way is helpful in the prevention of fraud and also in the misrepresentation of real estate. The process is deemed to be lengthy and inconvenient is not so. The Government of India has made several changes that ease property registration not just for Indian citizens but also for NRIs.
Elaborated below is a detailed guide on the registration of immovable property in India by NRIs.
Can NRI purchase immovable property in India?
To start the discussion on the registration of immovable property in India by NRI, let us understand if NRIs can make purchases in India. NRIs are eligible to make property purchases in India. However, the terms of the purchase must align with the Foreign Exchange Management Act. They must also get the required paperwork done first through competent property lawyers and also pay the required fees.
NRI Immovable Property Registration: Eligibility Criteria
In terms of eligibility criteria, the applicant who wishes to do registration of immovable property must meet the legal definition of NRI or Indian resident. Legally, any Indian citizen who lives abroad for education, employment, or other reasons is considered NRI.
However, as per the Foreign Exchange Management Act, 1999, the definition of NRI is different. According to FEMA, anyone who intends to stay in India determines their residential status.
The Income Tax Act also adds another definition of a resident in India. Individuals who have visited India for less than 182 days is a resident Indians.
NRI Immovable Property Registration: Procedure
There are not many steps that NRIs have to take to register any real estate. The process has also become simple and quicker because the process has become computerised. NRIs can register property from abroad as there is no middleman now but some paperwork is still done, in certain points in the registration process. In simplified terms, the process is as follows.
To start ensure there are no existing dues or debts on the property. Any mortgages yet to be paid or pending taxes must be settled to ensure there are no issues after the purchase.
To register an immovable property, there are many documents that must be prepared. In the absence of anyone document, the process can get delayed. It is recommended to prepare all documents beforehand. The full list of documents has been elaborated on in a section below.
Any utility bills or dues such as electricity bills, water bills or property taxes as stated in the first point, must be cleared up. There must be no unpaid dues before starting the registration process.
The fourth essential step in the process is to prepare the draft deed. The deed must have details of both parties, details of the property and the related terms and conditions. There is also a registration fee that must be paid at this step. To register the documents, get signatures from both parties and from two witnesses as well.
As per the Indian Stamp Act, 1899, a stamp duty or a small fee must be paid. The stamp duty is calculated on the market value of the said property.
NRI Immovable Property Registration: Stamp Duty
One confusing factor when buying property from NRI in India is the payment of stamp duty and registration fees. There is a difference between both fees not just in terms of the act it comes under but also in terms of definition. Stamp duty is covered under the Indian Stamp Act of 1899. The act states that a fee is to be charged on the instrument and not on the transaction involving the instrument. The stamp duty is calculated not using the nature of the instrument but using the substance of the instrument.
NRI Immovable Property Registration: Fee
Another important aspect of answering the question of how NRI registers property in India is paying the property registration fee. The registration fee differs greatly from state to state and depends on the state registration act. Generally, it is calculated as a percentage of the sale value of the said property. The calculation of both stamp duty and the registration fee is done using the ‘guidance value’ that depends on the location of the property and the type of land or building.
NRI Immovable Property Registration: Documents
An important part of the registration of property by NRIs is the documents. All of the following documents should be present in order to prevent any delays in the registration.
- Copy of residence proof of each owner. Accepted proofs are passports, Aadhar cards, driving licenses or voter id.
- Copy of PAN card of each owner
- Copy of certificate of possession
- Passport size photographs of both parties
- OCI or Overseas Indian Card held by the NRI
- Payment details
Immovable Property: Acquisition and Transfer
To further discuss the question of can NRI hold property in India, there are two important terms one must know, acquisition and transfer of property. NRIs cannot purchase all types of immovable property in India as there are limitations as set by the Reserve Bank of India. RBI’s notice on ‘Acquisition and Transfer of Immovable Property in India by NRIs/PIOs/Foreign Nationals of Non-Indian Origin’ states that NRIs cannot purchase agricultural or plantation land and farms.
However, the same agricultural or farmland can be transferred to an NRI. The rules of such transfer must be done as per the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000.
What Happens During Non-Registration of Immovable Property by NRI?
The process of registration is, however, easy now. The laws now today are also designed to favour NRIs. For a full breakdown of what the registration process would be like, contact Lex Solutions today.