| HOUSE OF OPPORTUNITIES
New Delhi, Nov. 13: The government is planning to rewrite the Foreign Exchange Management Act, 2000 (Fema) in a way that allows foreign nationals to buy property in India. However, the changes might come with riders, such as a lock-in period of three years, and limiting repatriation to the original investment.
Foreign nationals who visit the country on business are not allowed to buy property here, if they are not of Indian origin.
Several embassies have made presentations to the government against this rule and sought a reciprocal treatment in India. Indians, even if they do not live abroad, can buy property in several countries.
The Confederation of Real Estate Developers of India (Credai), the representative body of the real-estate industry, is lobbying for the relaxation in the Fema provisions. They have pointed out that earlier foreign nationals, including those who were not of Indian origin, were allowed to buy and hold properties in India.
According to Credai, there is a demand for service apartments from foreigners who visit India on business or pleasure or religious reasons. However, existing provisions in the act have made this impossible.
“Foreigners can buy firms here, but cannot own a house to stay when they come to check out their investments,” officials said. The rules do not even permit an Indian citizen with a foreign spouse, who is living abroad, to jointly buy a house here.
Only foreign nationals living and working here for at least a year can buy property. Even this is not allowed for the citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan.
Real estate developers say there is a huge clamour from Bangladeshis, Afghans and Sri Lankans for legal sanction to hold property in India .
Fema rules on property purchase also apply to acquisition through gifts or inheritance. This means even the foreign wife of an Indian living abroad cannot inherit his property here.
Finance ministry officials said, “The Fema rules were framed in the light of the East Asian meltdown, when property speculation by foreigners fuelled the crisis.”
However, officials feel that if lock-in periods can be brought in along with the previous rule that did not allow the appreciation in value to be repatriated, such investments “would not be in the category of speculative buys, but rather come as real long-term investments”. The government feels the rules should be relaxed only for urban araes, not for farm or plantations. Foreigners cannot own farms, except via a corporate entity.
Officials, however, said changes in the rules would require extensive consultation with other ministries and the Reserve Bank. “For instance, issues like whether the rent received by a foreigner on his property in India can be converted into dollars and taken out have to be addressed.”
Real estate developers, on the other hand, are excited that any move on these lines would fire up the already-booming property market.