What changed
This Master Circular compiles existing FEMA regulations on acquisition and transfer of immovable property in India by NRIs, PIOs, and foreign nationals into a single reference document. It includes a sunset clause, expiring on July 1, 2011, after which it will be replaced by an updated Master Circular.
What it means for you
Banks must verify that NRIs and PIOs use only permitted payment methods (inward remittance or specific accounts) for property purchases. The circular clarifies that no reporting to RBI is needed for residential/commercial purchases by NRIs under general permission. It also restricts property types (no agricultural land, plantation, or farmhouse) and requires prior RBI approval for citizens of certain countries.
What you must do
- Ensure NRI/PIO customers use only inward remittance, NRE, FCNR(B), or NRO accounts for property payments; reject traveler's cheques or foreign currency notes.
- Verify that the property type is not agricultural land, plantation, or farmhouse before processing transactions.
- Advise NRIs that no RBI filing is required for residential/commercial purchases under general permission.
- Check if the buyer is a citizen of a country requiring prior RBI approval for property transactions.
- Maintain records of all property-related remittances and account debits for audit and compliance.
Who it affects
Category-I Authorised Dealer banks, Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), Foreign nationals of non-Indian origin, Foreign embassies and diplomats
Can an NRI buy agricultural land in India?
No, the circular explicitly prohibits NRIs from purchasing agricultural land, plantation property, or farm houses. Only residential or commercial property is allowed under general permission.
What payment methods are allowed for an NRI buying property?
Payment must come from funds received via inward remittance from outside India, or by debiting an NRE, FCNR(B), or NRO account. Traveler's cheques and foreign currency notes are not permitted.
Does an NRI need to report a property purchase to RBI?
No, if the property is residential or commercial and purchased under general permission, no documents need to be filed with the Reserve Bank.