For a detailed and authentic answer one should always refer to the Foreign Exchange Management (Acquisition and Transfer of Immovable Properties in India) Regulations, 2000 as amended from time to time.

The above regulations have been notified by the Reserve Bank of India vide Notification No. FEMA/21/200-RB dated 3rd May, 2000. Likewise, to get a latest update on the subject the investors may also very carefully go through the latest Master Circular on Acquisition and Transfer of Immoveable Property in India by Non Resident Indians/Persons of Indian Origin which has been issued by the Reserve Bank of India vide Master Circular No.4/2012-13 dated 2/7/2012.

Before going further to analyse the different provisions of the law relating to acquisition and transfer of immovable properties in India by Non Resident Indians as well as by Persons of Indian Origin it would be worthwhile to know and understand the legal definition of these two entities as per the Foreign Exchange Management Act.

As per Notification FEMA-5 /2000 dated 3.5.2000 as amended from time to time, a Non Resident Indian (NRI) is a person resident outside India who is citizen of India or is a person of Indian Origin. Likewise, the definition of Person of Indian Origin (PIO) means an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan) who (i) at any time, held Indian passport, or (ii) who or either of whose father or whose grandfather was a citizen of India by virtue of Constitution of India or the Citizen Act, 1995.

With regard to acquisition and transfer of property in India by an Indian Citizen resident outside India it is specifically provided that a person resident outside India who is a citizen of India may -

a) acquire any immovable property in India other than agricultural/plantation /farm house, and b) transfer any immovable property in India to a person resident in India. c) transfer any immovable property other than agricultural or plantation property or farm house to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India.

As regards the Acquisition as well as transfer of Property in India by a Person of Indian Origin (PIO) the Regulation 4 of the above mentioned regulation specifically states that a person of Indian origin resident outside India may -

(a) acquire any immovable property other than agricultural land/farm house/ plantation property in India by purchase, from out of (i) funds received in India by way of inward remittance from any place outside India or (ii) funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank under the Act;

(b) acquire any immovable property in India other than agricultural land / farm house / plantation property by way of gift from a person resident in India or from a person resident outside India who is a citizen of India or from a person of Indian origin resident outside India;

(c) acquire any immovable property in India by way of inheritance from a person resident outside India who had acquired such property in accordance with the provisions of the foreign exchange law in force at the time of acquisition by him or the provisions of these Regulations or from a person resident in India;

(d) transfer any immovable property in India other than agricultural land/farm house/plantation property , by way of sale to a person resident in India;

(e) transfer agricultural land/farm house/ plantation property in India, by way of gift or sale to a person resident in India who is a citizen of India;

(f) transfer residential or commercial property in India by way of gift to a person resident in India or to a person resident outside India who is a citizen of India or to a person of Indian Origin resident outside India.

MCHI’s 14th India Realty Expo 2010 was a one-stop shop for potential buyers of Indian real estate. Over 25 developers and four banks and HFIs offered good buying and financial options. “We offered the MCHI ‘Seal of Approval’ during our property show, so that NRIs are assured of the fact that all properties on offer are legally clear, and MCHI stands with the NRI buyer as regards any promises made by the developer. In the unlikely event of such promises not being honoured, the MCHI will take up the matter on behalf of the NRI buyer,” MCHI President Sunil Mantri said on the show’s success.

This MCHI ‘Seal of Approval’ makes all the difference to an NRI looking at making the ‘buy’ decision at MCHI’s 14th India Realty Expo 2010. It makes a difference, given that the returns on investment potential of Indian real estate is far better as compared to other similar options available to global citizens of Indian origin or an Indian expatriate in the UAE.

“At MCHI’s 14th India Realty Expo 2010, the offerings will include all categories of Indian residential real estate — including the newest, affordable luxury homes. These product offerings have been welcomed by resident Indian buyers. To put it in the proper perspective, the investors found an opportunity to explore the abundant options that India’s real estate has to offer at the exhibition. In keeping with the ‘realistic offerings’ set-up, the exhibition also focused on ready-to-possess homes, valued in the Rs70 lakh to one crore range,”MCHI Secretary Deepak Goradia said.

“Prices have corrected to reasonable levels over the last year and half, this makes it a win-win scenario for those who enter the Indian real estate market now onwards, as they will get good returns. Even those who had invested during the boom times will see a steady recovery and growth in their investments — albeit over the next few years. New and developing locations on Mumbai’s periphery like Thane, Navi Mumbai, Mira-Bhayandar and Vasai-Virar-Boisar as also Kalyan-Badlapur-Karjat should see better returns for investors,” MCHI Exhibition Committee Chairman Boman Irani said.

Visitors who had registered at the expo were eligible to get a unique discount code, which is valid on Jet Airways tickets to India, subject to conditions. This is a step further in terms of “customer delight,” said Zubin Mehta. Over the years, NRIs have considered Indian real estate market a thriving investment destination with good returns on investment. Considering this scenario, one of India’s most prominent body of real estate builders and developers had organised the 14th India Realty Expo 2010 at the Renaissance Hotel in Dubai to cater to the ever-increasing demand for Indian real estate from NRIs.

A study by Assocham last year on the real estate scene in India indicated that the large Malayali and Punjabi NRIs are buying the houses of their liking. The study was based on the fact that Malyalis and Punjabis have migrated in hordes over the years. Some of them are also buying commercial space, it claimed. The study also said that NRIs from other states are also purchasing houses in either their home towns or other parts of the country. It seemed the realty market in general and super luxury segment in particular will get a new boost with this new purchase parity in the market.

However, the flurry of activity that the realty market witnessed in 2009 could not be sustained over a period of time, so it seems. Another study of Eminent scholar Dr. Chandrasekhar Tiwari of Delhi University, who has been studying Indian Diaspora from various angles, seems to be more accurate today that suggests that perhaps only those NRIs are buying properties in India who have migrated to other countries during the last 25 yeas or so. They are still very much close to their roots. Dr Tiwari was candid in his study that only the first generation NRIs are coming back to India.

Dr. Devender Gupta,CMD of realty advisory Century 21 India, says that that more often than not NRIs buy flats in the range of Rs 60 lakhs to Rs 80 lakhs. They buy properties for purely investment purpose. There is hardly any emotional factor that is involved in. As and when they get good appreciation on their properties, they dispose it off. The NRI bubble, unfortunately, could not be sustained by the realty market.