NRI, FEMA, home loans & IBC
NRI purchases and repatriation, loan-to-value caps, cash advances, REITs, and what happens to your flat if the builder goes insolvent.
Questions answered
Key laws, rules, forms and judgments
Foreign Exchange Management Act, 1999 (FEMA)
FEMA is India's main law for cross-border money and property dealings, replacing the stricter FERA. It governs how NRIs, OCIs and foreign nationals can buy, sell or inherit property in India, and how residents can send money or buy property abroad.
Act No. 42 of 1999 · in force · source
Foreign Exchange Management (Non-debt Instruments) Rules, 2019 - Rule 21 (Immovable Property)
This rule sets out exactly what kind of property an NRI or OCI can buy in India and how. It replaced the older FEMA 21(R) Regulations and is the current rulebook every NRI property deal must follow.
G.S.R. 796(E), Rule 21 read with Schedule I · in force · source
Prohibition on NRI/OCI Purchase of Agricultural Land, Plantation Property and Farmhouses
NRIs and OCIs are not allowed to buy agricultural land, plantation land or a farmhouse anywhere in India, even though they can freely buy residential or commercial property. The only way to own such land is to inherit it or already hold it from before becoming an NRI.
NDI Rules 2019, Rule 21(a) proviso · in force · source
Inheritance and Gift of Immovable Property Involving NRIs/OCIs
An NRI or OCI can inherit any property in India, including agricultural land, from a resident or another NRI. They can also give or receive property as a gift, but gifting agricultural land or receiving a gift from an unrelated foreign national needs closer FEMA compliance checks.
NDI Rules 2019, Rule 21(b)-(c) · in force · source
Permitted Payment Modes for NRI Property Purchases (NRE/NRO/FCNR only)
An NRI buying property in India must pay through an Indian banking channel - an NRE, NRO or FCNR(B) account, or inward remittance. Paying with foreign currency notes or traveller's cheques is not allowed under FEMA.
NDI Rules 2019, Rule 21(4) · in force · source
Repatriation of Sale Proceeds from NRO Account - USD 1 Million per Financial Year
An NRI or OCI can send abroad up to USD 1 million per financial year out of their NRO account balance, which includes money from selling property in India. This needs a Chartered Accountant's certificate confirming all applicable taxes have been paid.
Master Direction on Remittance of Assets, RBI/FED/2015-16/6 · in force · source
Repatriation of Sale Proceeds Limited to Two Residential Properties
If an NRI originally bought property using foreign exchange sent from abroad, they can repatriate the full sale proceeds (not just up to USD 1 million) for at most two residential properties. Beyond that, the same USD 1 million per year NRO ceiling applies.
RBI Master Direction No. 12/2015-16, para 8.4 · in force · source
Joint Ownership of Property Between NRI/OCI and Resident Indian
NRIs and OCIs can jointly own residential or commercial property with a resident Indian relative, which is common for home loans and succession planning. Each co-owner's contribution and repatriation rights are tracked separately.
NDI Rules 2019, Rule 21 · in force · source
Property Rules for PIOs and Foreign Nationals of Non-Indian Origin
A foreign national who is not of Indian origin generally cannot buy property in India and needs specific RBI approval, unlike NRIs and OCIs who face no such bar. A retired foreign employee or an inherited-property widow gets a limited remittance facility instead.
NDI Rules 2019, Rule 21 · in force · source
Prior RBI Approval Needed for Citizens of Pakistan, Bangladesh, China and Other Listed Countries
Regardless of NRI or OCI status, anyone who is a citizen of Pakistan, Bangladesh, China, Afghanistan, Iran, Nepal, Bhutan, Sri Lanka, Hong Kong or Macau needs the Reserve Bank's specific prior approval before buying any immovable property in India.
NDI Rules 2019, Rule 21 proviso · in force · source
RBI Master Direction on Acquisition and Transfer of Immovable Property under FEMA
This is RBI's consolidated rulebook that banks use day-to-day to process NRI, OCI and foreign national property transactions. It is updated periodically to reflect changes in the underlying NDI Rules 2019, so banks and buyers should always check the latest version on the RBI website.
Master Direction No. 12/2015-16 (as updated) · amended · source
Liberalised Remittance Scheme (LRS) - USD 250,000 per Year for Resident Individuals
A resident Indian (including a minor, through a guardian) can send up to USD 250,000 abroad every financial year for allowed purposes, including buying a house or flat overseas. This is the main legal route for Indians investing in property abroad.
Master Direction - LRS, FED Master Direction No. 7/2015-16 · in force · source
Form 15CA and Form 15CB for Remittances Abroad
Before a bank sends money abroad on behalf of an NRI or a resident, the remitter must usually file an online Form 15CA, backed by a Chartered Accountant's Form 15CB certifying the correct tax has been deducted. This is what lets banks process property sale proceeds or LRS remittances smoothly.
Rule 37BB, Income-tax Rules 1962 · in force · source
TDS on Sale of Property by an NRI - Section 195
When anyone buys property from an NRI seller, the buyer must deduct TDS on the full sale price (not just the profit) before paying - 20% for long-term gains and up to 30% for short-term gains, plus surcharge and cess. This applies at every price point, unlike the simpler 1% TDS rule for resident sellers.
Section 195, Income-tax Act 1961 · in force · source
Lower or Nil TDS Deduction Certificate - Section 197
An NRI seller can apply to the Assessing Officer for a certificate allowing the buyer to deduct TDS only on the actual capital gain rather than the entire sale price, which avoids locking up large sums until refund. This is filed online well before the sale closes.
Section 197, Income-tax Act 1961 · in force · source
Compounding of Contraventions under FEMA
If someone unknowingly breaks a FEMA rule - for example an NRI who bought agricultural land by mistake, or missed a reporting deadline - RBI allows them to 'compound' it by paying a settlement amount instead of facing prosecution. This is a common route to regularise past property-related FEMA slips.
Section 15, FEMA 1999; Foreign Exchange (Compounding Proceedings) Rules, as amended April 2025 · amended · source
PAN Requirement for Property Transactions
Both buyer and seller need a PAN for any significant property transaction, and an NRI seller specifically needs one to get any TDS credit or lower-deduction certificate. Without PAN, TDS is deducted at a much higher rate.
Section 139A / Rule 114B, Income-tax Act and Rules · in force · source
Foreign Exchange Management (Overseas Investment) Rules, Regulations and Directions, 2022
This is the rulebook that governs a resident Indian buying property or making investments abroad, working alongside the LRS. It replaced the older, more complex overseas direct investment rules with a simpler framework.
Notification No. FEMA 400/2022-RB · in force · source
Prevention of Money Laundering Act, 2002 (PMLA)
PMLA is India's anti-money-laundering law. Because property deals can be used to convert illicit cash into 'clean' real estate, the law has been extended over time to cover real estate agents and related professionals as entities that must report suspicious deals.
Act No. 15 of 2003 · in force · source
Real Estate Agents Notified as 'Designated Business or Profession' under PMLA (2020)
From late 2020, real estate agents with annual turnover of Rs 20 lakh or more are legally 'reporting entities' under PMLA, overseen by the Central Board of Indirect Taxes and Customs. This means they must do buyer/seller KYC and report suspicious cash-heavy deals just like banks do.
Notification, Dept. of Revenue, 28 Dec 2020 · in force · source
AML/CFT Guidelines for Real Estate Agents, 2023
These detailed guidelines spell out exactly what a real estate agent must do to comply with PMLA - verifying identities, keeping records for years, and reporting cash-heavy or unusual deals to the financial intelligence unit. Agents who ignore them risk being treated as facilitators of money laundering.
DGA guidelines under PMLA 2002, UAPA 1967 and WMDA 2005 · in force · source
Practising CAs, CS and CMAs Notified as Reporting Entities for Specified Client Transactions (2023)
Practising Chartered Accountants, Company Secretaries and Cost Accountants are now treated as PMLA reporting entities when they carry out specific financial activities for a client - including buying or selling immovable property on the client's behalf. This directly affects CAs who help NRI or resident clients close property deals.
Notification F. No. P-12011/12/2022-ES Cell-DOR, 3 May 2023 · in force · source
PML (Maintenance of Records) Third Amendment Rules, 2023
These 2023 amendments tightened the record-keeping and beneficial-ownership disclosure rules that apply to reporting entities, including real estate agents. Firms now must dig deeper to identify the real (beneficial) owner behind a buyer, especially for partnerships and trusts.
PML (Maintenance of Records) Rules, 2005, as amended 2023 · amended · source
Cash Restrictions on Property Deals - Sections 269SS, 269ST and Penalty Sections 271D/271DA
Indian tax law strictly limits cash in property deals: no more than Rs 20,000 cash can be taken as a loan, deposit or advance towards a property, and no more than Rs 2 lakh cash can be received in total from one person for a sale. Breaking either rule means a penalty equal to the entire cash amount involved.
Sections 269SS, 269ST, 271D, 271DA, Income-tax Act 1961 · in force · source
Benami Transactions (Prohibition) Amendment Act, 2016 - Link to Real Estate
A 'benami' deal is when property is bought in someone else's name (a relative, employee, or fictitious person) to hide the real owner, often using unaccounted cash - a common misuse in real estate. This law lets the tax department attach and permanently confiscate such property, with prosecution for both the real owner and the name-lender.
Act No. 43 of 2016, amending the 1988 Benami Act · in force · source
Insolvency and Bankruptcy Code, 2016 (IBC)
The IBC is India's unified law for resolving companies (including real estate developers) that cannot pay their debts. When a developer defaults, creditors - now including flat buyers - can push the company through a time-bound resolution process at the NCLT instead of years of ordinary litigation.
Act No. 31 of 2016 · amended · source
IBC (Second Amendment) Act, 2018 - Homebuyers Deemed Financial Creditors
This 2018 change was a turning point for homebuyers: money paid to a builder for an under-construction flat is now legally treated as a 'financial debt', putting buyers on the Committee of Creditors alongside banks. Before this, buyers had almost no formal voice if a developer went insolvent.
Act No. 26 of 2018, amending Section 5(8)(f) IBC · in force · source
Pioneer Urban Land and Infrastructure Ltd. v. Union of India
The Supreme Court upheld the 2018 law that made homebuyers financial creditors, ruling that staged payments by buyers do have the 'commercial effect of borrowing' that builders use to fund construction. This is the foundational case that secured homebuyers' seat on the Committee of Creditors.
Writ Petition (Civil) No. 43 of 2019 (with connected petitions); (2019) 8 SCC 416 · in force · source
IBC Amendment Act, 2020 - 100 Allottees or 10% Threshold to File CIRP
After the 2018 change let even a single unhappy homebuyer try to push a builder into insolvency, this 2020 amendment raised the bar: now at least 100 allottees, or 10% of all allottees in that project (whichever is fewer), must jointly file the case. This was meant to stop individual buyers from misusing insolvency as a pressure tactic.
Act No. 1 of 2020, inserting provisos to Section 7(1) IBC · in force · source
Manish Kumar v. Union of India
The Supreme Court upheld the 2020 rule requiring at least 100 homebuyers, or 10% of a project's allottees, to jointly file an insolvency case against a builder. It also gave relief to buyers whose cases were already pending when the rule changed, letting them adjust rather than be thrown out entirely.
Writ Petition (Civil) No. 26 of 2020 (with connected petitions) · in force · source
Corporate Insolvency Resolution Process (CIRP) - How It Works
CIRP is the formal, time-bound process at NCLT for trying to rescue a defaulting company - including a real estate developer - before considering liquidation. An interim resolution professional takes over management, and creditors vote on a rescue plan within a strict deadline.
Sections 6-32, IBC 2016 · in force · source
Moratorium under Section 14, IBC
The moment NCLT admits a company into insolvency, a strict freeze (moratorium) kicks in - no lawsuits, no recovery actions, and no selling off of the company's assets, including the real estate project, until the process concludes. This protects the project as a whole while a rescue plan is worked out.
Section 14, IBC 2016 · in force · source
Jaypee Kensington Boulevard Apartments Welfare Association v. NBCC (India) Ltd.
This case decided how Jaypee Infratech's stalled projects would be completed after its parent company's insolvency, approving NBCC's plan to finish the towers and hand over flats to homebuyers, with protections against further delay costs falling on buyers.
Civil Appeal Nos. 3395-3397 of 2020 and connected matters · in force · source
Bikram Chatterji v. Union of India (Amrapali Group Case)
In this landmark case against the Amrapali Group, the Supreme Court found the builder had diverted homebuyers' money and forged accounts, cancelled its RERA registration and normal insolvency process, and instead directly ordered NBCC to complete the stuck projects using forensic-audited funds, with promoters jailed for contempt.
Writ Petition (Civil) No. 940 of 2017 and connected orders through 2019 · in force · source
Chitra Sharma v. Union of India (Jaiprakash Associates Case)
This early case stopped Jaypee Infratech's insolvency proceedings from leaving homebuyers empty-handed, ordering the parent company Jaiprakash Associates to deposit Rs 2,000 crore as protection for buyers. It helped push Parliament to add homebuyers as financial creditors the same year.
Writ Petition (Civil) No. 744 of 2017 · in force · source
NCLT and NCLAT - Which Tribunal Handles What
The National Company Law Tribunal (NCLT) is where an insolvency case against a developer is first filed and decided; its decisions can be appealed to the National Company Law Appellate Tribunal (NCLAT), and from there to the Supreme Court. Both are specialised tribunals, faster than ordinary civil courts but still backlogged in practice.
Sections 408-410, Companies Act 2013; Section 61, IBC 2016 · in force · source
Taxation of REIT/InvIT Distributions - Dividend, Interest, Rental and 'Other Income'
Money a REIT pays out to unit holders can be dividend, interest, rental income, or return of capital, and each is taxed differently. Since April 2023, the part of a payout that is really a repayment of the REIT's debt is no longer tax-free and must be taxed as 'other income' in the unit holder's hands.
Sections 10(23FC), 10(23FCA), 115UA, Income-tax Act 1961 · amended · source
Capital Gains Tax on Sale of REIT/InvIT Units - Section 112A
If you sell listed REIT or InvIT units on the stock exchange after holding them more than 12 months, the gain is taxed as long-term capital gains at 12.5%, with the first Rs 1.25 lakh of such gains in a year tax-free. Selling within 12 months attracts a higher 20% short-term rate.
Section 112A and Section 111A, Income-tax Act 1961 (rates as amended by Finance Act (No. 2) 2024) · in force · source
RBI Loan-to-Value (LTV) Norms for Home Loans
RBI caps how much of a property's value a bank can lend as a home loan, on a sliding scale - the bigger the loan, the smaller the percentage. This decides the minimum down payment a buyer must arrange from their own pocket.
RBI risk-weight/LTV linked circulars, as consolidated in Master Direction · in force · source
Master Direction - Non-Banking Financial Company - Housing Finance Company (Reserve Bank) Directions, 2021
Since 2019, RBI (not the National Housing Bank) directly regulates housing finance companies - the NBFCs that give most home loans outside of banks. This Master Direction sets their capital, lending and disclosure rules, replacing NHB's older regulatory framework.
RBI/2020-21/73 DOR.FIN.HFC.CC.No.120/03.10.136/2020-21 · in force · source
From CAPGAIN's law library (95 records in this area), checked 25 Sept 2026. Records still awaiting confirmation are not shown here.