Funding The Purchase
An NRI, PIO or OCI can purchase immovable (commercial & residential) property in India using their repatriable or transferred funds.
The buyer has to make the purchase in rupees through funds received in India via normal banking channels, or through funds maintained in any non-resident account under FEMA and RBI regulations.
Types of accounts that can be maintained by an NRI / PIO in India
An NRI or PIO can open, hold and maintain the following types of accounts with an authorized bank in India, without explicit permission from the Reserve Bank.
- Non-Resident Ordinary Rupee Account (NRO Account)
Any individual residing outside India may open an NRO account with an authorized dealer (or an authorized bank) for the purpose of conducting a legitimate transaction in rupees. NRO savings accounts can also be maintained through post offices in India.
- Non-Resident (External) Rupee Account (NRE Account)
An NRE account can be in the form of savings, current, recurring or fixed deposit accounts. These accounts can only be opened by the NRI himself (as defined under Regulation 2(vi) of Notification No. FEMA 5/2000-RB dated May 3, 2000) and not through the person who holds the power of attorney.
- Foreign Currency Non Resident (Bank) Account – FCNR (B) Account
NRIs are eligible to open and maintain FCNR (B) accounts in the form of term deposits taken for a period of 1 to 5 years. The account can be held in any freely convertible currency.
- The RBI allows NRIs to take home loans for purchasing property in India. They are also permitted to take loans for home repairs and renovations.
- EMIs on the home loan can be paid in any of the following ways:
- By remitting the money from the NRI’s foreign bank account through regular banking channels
- By issuing post-dated cheques or Electronic Clearance Service (ECS) from the individual’s NRE, NRO or FCNR Account
- Out of the rental income that the property earns
- Through cheques issued from a local relative’s bank account
Power of Attorney (POA)
The NRI does not have to be physically present in India in order to purchase or sell a property. The process can be facilitated by one of their representatives in India – someone who holds the power of attorney to act on their behalf.
The power of attorney gives an individual the power to act on behalf of another. The two major types of POA:
General Power of Attorney
A General Power of Attorney is granted when the Agent has to be empowered to conduct many transactions on behalf of the Principal.
Special Power of Attorney
A Specific Power of Attorney is granted when the Agent has to conduct only specific transactions.
Execution of Power of Attorney by an NRI
The power of attorney should be executed on a stamp paper or plain paper (whichever is applicable in the country where the power of attorney is executed). The NRI needs to sign the power of attorney before a consulate officer or a notary in the country where he is residing. The signature on the deed has to then be attested by the consulate officer or notary.
It is highly advisable to get the power of attorney attested by the Indian consulate, so that it may be considered more authentic. The POA (Power of Attorney) then has to be sent to India, where it should be presented for adjudication within three months.
Adjudication of the POA (Power of Attorney)
Adjudication is the process of registering the POA document in the registrar’s office in order for it to be accepted as a registered POA. Once it has been adjudicated, the POA cannot be misused by altering it. After registration, the document will remain with the registration department. A copy of the document can be obtained even several years after the actual transaction, if anyone wants to verify its authenticity.
The stamp duty to be paid for the POA registration varies for each state in India. It is also determined based on the contents of the deed.