INDIANS SCOPE ABROAD

Indians Buying Property Abroad
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The Foreign Exchange Management Act (FEMA), 1999 specifies that a person resident in India may hold,
own, transfer or invest in foreign currency, foreign security or any immovable property situated outside
India if such currency, security or property was acquired, held or owned by such person when he was
resident outside India or inherited from a person who was resident outside India.
Further, in order to liberalize the foreign exchange facilities available to resident individuals, RBI has
started a Liberalized Remittance Scheme that allows a resident Indian to remit up to US$ 125,000 in one
financial year for any permitted capital and current account transactions, including acquisition of
immovable property, shares, debt instruments or any other assets outside India as permitted under the
scheme.
Liberalized Remittance Scheme (LRE)
The Liberalized Remittance Scheme (LRE) permits all resident Indians, including minors, to make
remittance for an amount not exceeding USD 125,000 per financial year for any Current or Capital
Account transaction or a combination of both. Remittance under this scheme is on a gross basis.
LRE Guidelines
1. Under the Scheme, resident individuals can acquire and hold immovable property or shares or
debt instruments or any other assets outside India, without prior approval of the Reserve Bank
of India. Individuals can also open, maintain and hold foreign currency accounts with Banks
outside India.
2. The investor can retain and reinvest the income earned on investments made under the
Scheme. Currently, the residents are not required to repatriate the funds or income generated
out of investments made under the Scheme.
3. Remittances under the facility can be consolidated in respect of family members subject to the
individual family members complying with the terms and conditions of the Scheme.
4. The facility under the Scheme is in addition to those already available for private travel, business
travel, studies, medical treatment, etc as described in Schedule III of Foreign Exchange
Management (Current Account Transactions) Rules, 2000. The Scheme can be also be used for
these purposes.
5. Gift and donation remittances cannot be made separately and have to be made under the
Scheme only. Accordingly, resident individuals can remit gifts and donations up to USD 100,000
per financial year under the Scheme. Any money transferred to another country is taxable
except money transferred as gift on the occasion of marriage of an individual, irrespective of any
limit (but within reasonable amounts) as specified by the taxation laws.

6. Remittances under the Scheme can be used for purchasing objects of art subject to the
provisions of other applicable laws such as the extant Foreign Trade Policy of the Government of
India.
7. The Scheme can also be used for remittance of funds for acquisition of ESOPs. The remittance
under the Scheme is in addition to acquisition of ESOPs linked to ADR/GDR
8. The remittance under the Scheme is in addition to acquisition of qualification shares. (i.e USD
20,000/- as 1% of paid up capital of overseas company whichever is lower).
9. A resident individual can invest in units of Mutual Funds, Venture Funds, unrated debt
securities, promissory notes, etc under this Scheme. Further, the resident can invest in such
securities out of the Bank account opened abroad under the Scheme.
10. An individual, who has availed of a loan abroad while a non-resident can repay the same on
return to India, under this Scheme as a resident
11. It is mandatory for resident individuals to have PAN number for sending outward remittances
under the Scheme.
12. In case a resident individual requests for an outward remittance by way of issuance of a demand
draft (either in his own name or in the name of the beneficiary with whom he intends putting
through the permissible transactions) at the time of his private visit abroad, such an outward
remittance can be effected against self declaration of the remitter in the format prescribed
under the Scheme.
List of transactions NOT permitted under the scheme
1. Remittance from India for margins or margin calls to overseas exchanges/ overseas
counterparty.
2. Remittance for any purpose specifically prohibited under Schedule-I (like purchase of
lottery/sweep stakes, tickets proscribed magazines etc) or any item restricted under Schedule II
of Foreign Exchange Management (Current Account Transactions) Rules, 2000.
3. Remittances made directly or indirectly to Bhutan, Nepal, Mauritius or Pakistan.
4. Remittances made directly or indirectly to countries identified by the Financial Action Task Force
(FATF) as "non co-operative countries and territories" from time to time.
5. Remittances directly or indirectly to those individuals and entities identified as posing significant
risk of committing acts of terrorism as advised separately by the Reserve Bank of India to the
Banks.

Property purchase procedures, rules and regulations vary across nations, more so for the non-
residents/foreigners. For example, in Australia, the types of property foreigners can purchase are
restricted. Similarly, in the US, non-US citizens can purchase property, depending on their immigration
status. In all the cases, credit history along with the employment and citizenship details of an individual;
acquiring property abroad will be checked.
One should also be aware of the property acquisition process as well as the local regulations before
investing in real estate abroad. There are multiple modes of financing property acquisition abroad. Some
of these include:
1. Own sources: The buyer may fund the purchase from funds in India under the Reserve Bank of
India's Liberalized Remittance scheme.
2. Overseas mortgage with an international mortgage provider: A feasible option is to claim
mortgage from a bank in the chosen destination. The foreign banks with branches all over the
world offer several overseas mortgage plans based on the value of the property to encourage
foreign investors to buy property abroad. Typically, the loan amount offered is 75-80% of the
property value and the tenure for overseas loans ranges from 5 to 30 years. The rate of interest
offered may be fixed or variable, and varies across countries and lenders. For example, rate of
interest is relatively higher in European countries.
3. Local financing from a developer: Many developers offer their own in-house financing. For
example, in Dubai this is prevalent.
Certain Countries are quite liberal and their Embassies / High Commissions easily provide requisite
information for availing housing loans. Although mortgages are available on all types of properties, the
lending may vary for each property type. For example, in some countries like Turkey, mortgage is
available only on completion of the project/property, while in some cases, the amount is lent
subsequently as the project develops. So, if individuals need to avail housing finance abroad, then they
should be familiar with the loan procedures and guidelines applicable in the country

Tips for Buying Property Abroad
Here are a few practical tips to help you buy property in another country:
1. Know the purpose of buying: It is important to realize the purpose of buying a property abroad.
If you are buying a property for gaining visa or citizenship, then you need to think twice because
every country follows different regulations regarding property ownership. For example, in Hong
Kong, owning a property by a foreigner helps in securing visa, but in New Zealand, the UK, and
Australia, possessing an immovable property confers no advantage towards a residency permit.
However, if you work abroad or have children studying abroad or are a frequent visitor to a
destination abroad, then buying property abroad is surely a viable option.
2. Do you homework: Before you initiate the buying process, ensure that you find out all about the
country you are considering for property purchase, including climate, cost, connectivity,
economy, etc. Also, make a visit to the country and get in touch with a local estate agent to
understand the dynamics of the property market in the area and to educate oneself on available
properties and locations.
3. Know the tax liability: Another aspect that one needs to consider is the tax liability associated
with owning a real estate, including taxes payable while purchasing, holding, renting, and selling
property – both in the country where you are investing and also in India. Check the inheritance
and capital gains tax laws of the country where you are buying immovable property. Tax
implications vary across countries and according to the type of property bought; so ensure you
are aware of these to avoid any surprises later. Identifying the need to avoid double taxation,
that is, paying taxes in India as well as in their country of residence, the Government of India has
entered into Double Taxation Avoidance Agreement (DTAA) with 65 countries including the
U.S.A., the U.K., Japan, France and Germany. In case of countries with which India has Double
Taxation Avoidance Agreements, the tax rates, are determined by such agreements.
4. Verify the credentials of your real estate agent: Ensure that the real estate from whom you are
buying property is well reputed and registered under the respective laws of the concerned state.
The agent should be proficient in your chosen country's laws and processes and know the
specifics involved in buying a property there. Ask your property agent for all the necessary
documents including building regulations and planning permissions.
5. Verify the title to the property: Engage a qualified lawyer to inspect and confirm the validity of
the title deed and related documents, and ensure there are no encumbrances on the property.

6. Contract: Never sign a contract that you do not understand, especially if it is in a foreign
language. Get the contract translated into native language and understand the nuances with the
help of a qualified lawyer. The legal expert can also guide you about the property laws prevalent
in the country. If two versions of a contract are provided, i.e., English and local language, ask
your solicitor to confirm that the English version is a true translation. The contract involved in
buying a property should be tripartite agreement including Indian buyer, foreign seller/real
Estate Company, and Indian representative, which should be a registered company under Indian
laws (and not an individual). Many foreign real estate companies have opened up franchises in
India that act as Indian representative in a property deal abroad. As these representatives are
more aware of the property market in their respective countries, they can guide the Indian
buyers accordingly, and in case of legal disputes, they can be held accountable.
7. Get the money matters right: Arrange for sufficient funds to include property value as well as
maintenance costs including travel, repair, and renovation costs. If you are arranging finance on
the property, ensure that this is stated in any contract and, where possible, seek an 'opt-out'
clause if the loan is not disbursed (which will ensure any deposit paid is refunded). When
claiming mortgage, cover all hidden costs, as it would be difficult to claim more when initial
paperwork has been completed by the Bank. Also, remember that your mortgage will probably
be in local currency, and you must consider the impact of fluctuations in exchange rates.
8. Open a local account: Open a Bank account in your chosen country and, where relevant, ensure
you obtain a Certificate of Importation for the money you bring in from your home country. Set
up standing orders in your local Bank account to meet local bills and taxes.
9. Study Property Price Indices: A careful study of property price indices of a country or area where
you wish to acquire property is also recommended. This will ensure your awareness and
clarification of trends for commercial as well as residential property.
Source: National Housing Bank

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