by Akhilesh K Prasad
An increasing number of resident Indians have shown interest in travelling abroad on business or for taking up jobs. Such Indian residents desire ownership of properties in places where they find a livelihood. Indians are also interested in investments outside the country where they may be lucrative real estate propositions. They can do so, bearing in mind certain restrictions imposed by the Foreign Exchange Management Act (FEMA).
FEMA requires that a resident Indian desirous of purchasing immovable property abroad must first seek special permission from the Reserve Bank of India (RBI) to do so. This restriction is not applicable to the following categories of resident Indians.
- Those who are NOT Indian citizens but reside in India and own an immovable property abroad.
- Residents of India who acquired property abroad before the 8th of July 1947.
- A resident of India who acquires immovable property outside India under a lease for a period not exceeding five years at a stretch.
- Those relatives who have received such properties through gift or inheritance.
Once the RBI has granted permission, the consideration for purchase is paid the Indian resident from the balance held in his Resident Foreign Currency (RFC) account. The remittance must, however, be within the limits laid down by the Liberalised Remittances Scheme (LRS), whereby the quantum should not exceed USD 2.5 lakh per year (inclusive of all other expenses). Thus a family of four could remit USD 10 lakh per year at max.
For each country and property type, there are different procedures and diligence requirements. For instance, Singapore allows foreigners to purchase apartments but not land, while Thailand allows foreigners only leasehold title to land for a renewable but ultimately limited period. In Dubai, apartments are sold as leasehold property. Given hereinafter is a basic checklist for buying property overseas:
- Consider all the associated fees (legal, taxes, insurance, maintenance, brokerage etc) before negotiating the purchase price.
- Consult a reliable local property broker to guide you through the process.
- Hire a local lawyer to ensure due diligence to legalities.
- Hire a tax consultant to help you comply with tax regulations. Such a consultant should have offices in India and the destination country.
- In case of leased property, consider availing of the services of a property management firm for the purpose of collecting rent, payment of charges, maintenance etc.
Finally, it is also advisable for investors to scrutinize the credentials of the developer, location of the project and the amenities offered along with the property.