For the purpose of FERA , a Foreign Citizen is of Indian  Origin if (i) he held an Indian Passport at any time, or (ii) he or his father or paternal grandfather was/were a citizen (s) of India as per the Constitution of India or the Citizenship Act, 1955. However, citizens of Pakistan, Bangladesh, Afghanistan, Bhutan, Sri Lanka and Nepal are excluded from the definition of Indian Origin.

For Foreign Citizens of Indian Origin, different procedures have been laid down depending on:

(a) whether they invest their money in the form of foreign currency remitted from abroad through normal banking channels or from funds withdrawn from the NRE/FCNR accounts; or

(b) from local funds in Rupees.

Investment from Local Funds

Procedure

For foreign citizens of India origin, who wish to invest their local (Indian) funds in immovable properties, the procedure is  different. These persons require permission from Reserve Bank of India prior to their making the investment in immovable property. Such person have to apply to Reserve Bank of India in Form IPI 1. Reserve Bank of India will grant its permission for foreign citizens to invest their local funds in immovable  properties provided  it is required only for their bonafide  residential use. Properties not immediately required for use can be let out. Foreign citizens resident in Indian are generally permitted by Reserve Bank of India to acquire only one immovable property in India for their families’ own bonafide residential use if their local funds are to be invested in these properties.

Repatriation

If Indian rupees are used for investment, no repatriation is permitted except of Rental Income. Reserve Bank of India has to be satisfied about the reasonableness of the valuation of the property and further, the purchasers have to furnish an undertaking to Reserve Bank of India that they will not ask for repatriation outside India of the sale proceeds thereof.

Investment from Foreign Funds

Procedure

If foreign citizens invest in the immovable property out of Foreign Exchange remitted through normal banking channels or from funds withdrawn from their NRE/FCNR accounts, the Reserve Bank of India has given them general permission. For them no prior RBI formalities are necessary before purchasing immovable properties. It is necessary for such persons to submit to Reserve Bank of India , a declaration in Form IPI 7 within a period of 90 days from the date of purchase of the properties. Form IPI 7 must be accompanied by a certified copy of the property in the names of the purchasers and certificates from banks in India which would prove that the purchase consideration was paid either out of remittances received from abroad through normal banking channels or from funds held in the purchaser’s NRE/FCNR accounts maintained in India.

Repatriation

Reserve Bank of India permits repatriation of original investment in equivalent foreign exchange after obtaining their prior approval, and such repatriation is subject to the following conditions :

i)  In case of residential properties, repatriation is subject to a maximum of 2 houses.

ii) The properties should have been purchased on or after 26^th May, 1993.

iii)  The properties have been held by the purchaser for a period of at least three years from the date of final purchase deed or from the date of payment of final instalment of the purchase consideration, if the purchase agreement so provides, whichever is later.

iv) Only the amount of sale proceeds equivalent to the original investment in foreign exchange will be allowed to be repatriated outside India. The balance amount of sale proceeds of the property should be credited to the seller’s  NRO account or to the Resident Rupee Account (in case of resident foreign citizens), with an authorised bank in India. Thus, the balance sale proceeds over and above  the original investment in foreign exchange in not repatriable.

iv) In case the seller intends to repatriate the original investment in the immovable property after 3 years, he should take permission from the RBI prior to approaching his banker to allow him the repatriation. The  application for repatriation must be made within a period of 90 days of sale of the property in the prescribed Form IPI 8

If for any bona fide reasons beyond the control of the seller, the seller is prevented from filing the prescribed application for repatriation, within the above period, he can present the case before the Reserve Bank of India explaining  the reasons for his failure to file  the application for repatriation in time. The Reserve Bank of India, on merit, may permit such repatriation.

vi) The above policy covers both commercial and residential immovable property  but they do no cover acquisition of agricultural  land or farm house or plantation properties.