News & Views on Indian Real Estate

Friday, October 17, 2008

Investment Opportunities for NRIs

Investment by NRIs in India can be broadly classified as investment on repatriation basis and on non repatriation basis. Repatriation basis means the income/dividend/ interest earned from the investment and the sale/maturity proceeds of investment can be repatriated outside India at any time or can be credited to NRE account of the investor subject to deduction/payment of Income Tax.

Non repatriation basis denotes that the amount invested and its capital appreciation will not be allowed to be repatriated. However, the interest/dividend/income earned may be permitted to be repatriated/credited to NRE account of the investor, subject to terms prescribed by RBI.

Investment on repatriation as well as non repatriation basis is permitted in the following categories.

Government dated securities (other than bearer securities) /treasury bills.

units of domestic mutual funds.

bonds issued by a public sector undertaking (PSU) in India.

shares in Public Sector Enterprises being dis-invested by the Government of India, provided the purchase is in accordance with the terms and conditions stipulated in the notice inviting bids.

shares and convertible debentures of Indian companies under FDI scheme (including automatic route & FIPB).

shares and convertible debentures of Indian companies through stock exchange under Portfolio Investment Scheme.

(1) Other Investments on non-repatriation basis:

units of Money Market Mutual Funds in India.

Deposits with Indian companies
(including non-banking finance companies registered with RBI), or a body corporate created under an Act of Parliament or State Legislature or a proprietorship concern or a firm in India.

These deposits shall be only by debit to NRO Accounts and shall not represent inward remittances or transfer from NRE/FCNR(B) Accounts into the NRO account.

the capital of a firm or proprietary concern in India, not engaged in any agricultural / plantation activity or real estate business.

Exchange Trade Derivative Contracts approved by SEBI

(2) Immovable Property

NRIs and PIO can acquire immovable property in India other than agricultural/plantation property or a farmhouse.

NRIs and PIOs can repatriate sale proceeds of immovable property acquired in India –

(Immovable property acquired out repatriable foreign funds) to the extent of repatriable funds paid for acquiring the property, without any lock-in period. In case of residential property, the repatriation is restricted to two residential properties. (Immovable property acquired out of rupee funds) to the extent of USD 1 million per calendar year out of balances held in their NRO account, with a lock-in period of 10 years.

NRIs/ PIOs can also repatriate-

1. refund of application/earnest money/purchase consideration made by house-building agencies/seller on account of non-allotment of flats/plots/cancellation of booking/deals for purchase of residential/commercial properties, together with interest, net of taxes, provided original payment is made out of NRE/FCNR(B) account/inward remittances.

In all the cases of direct investment the concerned investor company has to take the necessary permission from Reserve Bank of India wherever required and in view of this the investor need not seek RBI approval.

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