NRI Investments in India & Overseas Investments by Indians
-Anup P. Shah
25th December, 2011
JB Nagar CPESC of WIRC
PROI & NRI
© PRAVIN P. SHAH & CO. 2
Person Resident Outside India
� PRII – S.2
� Any person who has stayed in India
� For more than 182 days in Preceding PY
� Ram is in India in 2009-10 for 315 days
� In 2010-11 he would be in India only for 170 days� In 2010-11 he would be in India only for 170 days
since he would go abroad for medical treatment
� Status for 2010-11: PRII since in 2009-10 he was in
India for > 182 days
� Preceding PY’s stay is relevant and not current PY
� Any person not a PRII is a PROI
© PRAVIN P. SHAH & CO. 3
Person Resident Outside India
� Student going abroad for Studies
� Treated as NRIs?
� Correct?
� Are they eligible for all facilities which NRIs get
under FEMA?under FEMA?
� Educational Loans availed of by them as Residents
� Continue to be available
© PRAVIN P. SHAH & CO. 4
PRII- Exceptions
PROI inspite of staying in India > 182
days in Preceding PY
PRII inspite of not staying in India >
182 days in Preceding PY
If he comes for Other than 3 purposes
Goes abroad on Employment On Employment
Goes abroad on Business For Business / Vocation
Goes abroad for:
• any other purpose
• in such circumstances
• which indicate an intention to stay
abroad for an uncertain period
For:
• any other purpose
• in such circumstances
• which indicate an intention to stay in
India for an uncertain period
© PRAVIN P. SHAH & CO. 5
PRII- Exceptions
� Ali who is living in India all his
life goes to Dubai to start a
business on 30th Mar 2011
�
� Patel comes to India on 1st Oct
� Gita goes to Harvard for an
MBA on 1st June 2011
�
� John comes to India for the
first time and stays for 150� Patel comes to India on 1st Oct
2010 for a job. He has never
been to India before
�
first time and stays for 150
days in 2010-11 for medical
treatment
�
© PRAVIN P. SHAH & CO. 6
NRI & PIO
� NRI: PROI who is an Indian Citizen or PIO
� PIO: Citizen of any Country
(Other than Bangladesh / Pakistan):
� At any time held an Indian PassportAt any time held an Indian Passport
� Whose Parents at any time were Indian citizens
� Whose Grand Parents at any time were Indian
citizens
� Whose Spouse is an Indian Citizen
© PRAVIN P. SHAH & CO. 7
Visas
� OCI Card
� Dual Citizenship
� Multiple Entry Lifelong Visa
� No need for registration with FPRO
� Parity with NRIs in Economic benefits
� But no Voting Rights
� PIO Card
� Multiple Entry 15 Years Visa
� Need for registration with FPRO
© PRAVIN P. SHAH & CO. 8
FDI & Instruments
© PRAVIN P. SHAH & CO. 9
Key Types of Foreign Invst.
Foreign Investment
Primary - FDI Secondary
Invst by PROI in
Capital of an Indian
Co.
Purchase by PROI
of Shs. Of Indian Co.
© PRAVIN P. SHAH & CO. 10
Direct Downstream Portfolio Off-Market
FIIs
NRIs / PIOs
Repatriable
Non-repatriable
PIS
© PRAVIN P. SHAH & CO. 11
PIS
� NRIs /PIOs can Buy / Sell on St. Ex.
� Through a Bank Branch approved by RBI
� Limit per NRI: Up to 5% of Paid-up value of Shares
� Total Limit for all NRIs: 10%
� Can be Extended Up to: 24%
� No Speculative Trades – only Delivery based
� Payment by:
� Inward Remittance / NRE/ FCNR - if on R basis
� Inward Remittance / NRE/ FCNR / NRO - if on NR basis
© PRAVIN P. SHAH & CO. 12
PIS
� NRIs /PIOs can trade on St. Ex.
� No Sectoral Caps or Restrictions
� Can they buy Retail, Real Estate, NBFC, Telecom, etc.
stocks listed on BSE/ NSE?
� What about Min. Area Conditions / Min. Cap / Lock-in as� What about Min. Area Conditions / Min. Cap / Lock-in as
under FDI
�
� Sale Proceeds After tax to be Credited to:
� To NRO A/c. – If on NR Basis
� To NRE / FCBR / NRO / Abroad – If on R Basis
© PRAVIN P. SHAH & CO. 13
PIS
� NRIs /PIOs can trade on St. Ex.
� Shares purchased under PIS cannot be gifted / sold
by Private Arrangement
� However, NRIs can gift them to their Relatives or to a
registered Charity Trustregistered Charity Trust
� Relatives: S.6 of Companies Act
� Must be sold on the Stock Exchange alone
� Can invest in Exchange Traded Derivatives
� But on NR Basis
© PRAVIN P. SHAH & CO. 14
Non-Repatriable
© PRAVIN P. SHAH & CO. 15
Non-Repatriable FDI
� Meaning:
� Only Dividend / Interest can be sent back abroad
� Principal + Gains cannot be repatriated
� Must be credited to NRO A/c.
NRI/PIO can buy shares on NR Basis:� NRI/PIO can buy shares on NR Basis:
� Without any limit
� Not Nidhi / Chit Fund / Plantations/ Farm Houses /
Dealing in TDRs
© PRAVIN P. SHAH & CO. 16
Non-repatriable
� Non-repatriable FDI
� Q Would the Sectoral Caps and Limits of
Repatriable FDI apply?
� Sale Proceeds credited to NRO A/c.
� Q. Is Repatriation Possible from NRO A/c.?
© PRAVIN P. SHAH & CO. 17
Transfer of Shares From / To NRI
© PRAVIN P. SHAH & CO. 18
Share Sale by Resident to NRI
� Auto Route of FIPB, except in following:
� Sectors with caps
� Including:
� Defence
� Air transport
© PRAVIN P. SHAH & CO. 19
� Air transport
� ARC / banks
� Broadcasting
� Commodity Exchanges
� Credit Info Cos.
� Insurance
� Telecom / satellites
Share Sale by Resident to NRI
� Auto Route of RBI, even where:
� FIPB approval required for Transfer
� Cases where Takeover Regs. attracted
� Provided pricing Guidelines met
� Co. in Financial Services / Banks, Insurances,
© PRAVIN P. SHAH & CO. 20
� Co. in Financial Services / Banks, Insurances,NBFCs, ARCs, etc.
� NOC from Financial Service Regulator obtained
� Pricing Guidelines not met
� Provided FDI Policy met, SEBI Regulations complied,CA’s Certificate to this effect annexed
� Approval if Consideration is deferred
Share Sale by Resident to NRI
� Auto Route of RBI:
� Pricing Guidelines
� Listed Cos. – as per Preferential Issue Price
� Unlisted Cos. – Equal to or Higher than DCF
Valuation of Company by CA / MB
© PRAVIN P. SHAH & CO. 21
Valuation of Company by CA / MB
� Form FC-TRS should be filed with documents
� Quadruplicate
� With Bank
� Undertaking from NRI: He is eligible to Buy
� Copy of SPA
�
Share Sale by NRI to Resident
� Auto Route of RBI:
� Pricing Guidelines
� Listed Cos. – as per Preferential Issue Price
� Unlisted Cos. – Equal to or Lower than DCF
Valuation of Company by CA / MB
© PRAVIN P. SHAH & CO. 22
Valuation of Company by CA / MB
� Even if Pricing G/L not met
� FEMA /FDI Policy & SEBI Regs. met & CA’s Cert.
� Form FC-TRS should be filed with documents
� Quadruplicate
� With Bank
� Copy of SPA
� Tax Clearance from AO / CA’s Certificate
Share Sale by NRI to NRI / PROI
� Sale by NRI to NRI
� Automatic Route permission of RBI
� No documentation
� No Pricing Guidelines
� Sale by NRI to any PROI
� Automatic Route available?
� Documentation?
� Pricing Guidelines?
© PRAVIN P. SHAH & CO. 23
Other Instruments
© PRAVIN P. SHAH & CO. 24
Other Instruments
� NRI / PIO can purchase :
� On Repatriation Basis
� Without any Other Limit
� G-Secs / T-Bills / Units of MFs
PSU Bonds� PSU Bonds
� PSU Divestment Shares
� On NR Basis
� Above Instruments
� NSCs
© PRAVIN P. SHAH & CO. 25
Other Instruments
� NRI / PIO can purchase :
� Foll. Issued by Banks -
� Re. denominated Perpetual Debt Instruments:
� Total Ceiling of 24% of each Issue
� Per NRI: 5% of each issue� Per NRI: 5% of each issue
� Debt Capital Instruments
� As per the applicable policy from time to time
� What about:
� PPF
� Senior Citizen Bonds / RBI 8% Taxable Bonds
© PRAVIN P. SHAH & CO. 26
Loans by NRIs
© PRAVIN P. SHAH & CO. 27
Loans by NRIs
Loans by NRIs
To Close Relatives
To Ind/Firm/LLP in Rupees
Loans by NRIs In NCDs of Co.
Public Deposits
Deposits with Firm/Co/Sole
© PRAVIN P. SHAH & CO. 28
Loans by NRIs – Close Relatives
� NRIs may lend to close relatives in India
� Up to $250,000
� Limit is per Individual relative in India
� Thus, an NRI can lend up to $250,000 to each relative
Minimum maturity of Loan: 1 year� Minimum maturity of Loan: 1 year
� Interest-free Loan
� Inward remittance / NRE/FCNR
� Close Relative:
� S.6 ~ Companies Act
© PRAVIN P. SHAH & CO. 29
Loans by NRIs – Rupees
� NRI /PIO may lend to Individuals / Firms/ LLPs
� To Residents
� Loan in Rupees
� Not to Indian Companies
� Maximum Tenure of Loan: 3 years
� Interest @ 2%over Bank Rate
� Inward remittance / NRE/FCNR
� Principal cannot be repatriated
� Credited to NRO A/c.
© PRAVIN P. SHAH & CO. 30
Loans by NRIs – Rupees
� NRI /PIO may lend to Individuals / Firms/ LLPs
� Borrower not in Chit fund / Agr. Plantation / Real
Estate Business / TDRs trading
� Borrower cannot use loan for:
Capital / Equity Contribution in a Firm / Co. / Proprietory� Capital / Equity Contribution in a Firm / Co. / Proprietory
Concern
� Relending
© PRAVIN P. SHAH & CO. 31
Loans by NRIs – NCDs Invst
� NRI /PIO may invest in NCDs of a Co.
� Issue by Public Offer
� Min. Tenure of NCDs: 3 years
� Interest < SBI’s PLR + 3%
� Co. not in Agro Plantations / Real Estate
Business/TDR trading / Nidhi / Chit Fund
� Max. Limit = Sectoral Cap for FDI for Co.
� Can be on R or NR Basis
© PRAVIN P. SHAH & CO. 32
Loans by NRIs – Public Deposits
� NRI can place Public Deposits
� With Co / NBFCs
� As per Cos Deposit Rules u/s. 58A / NBFC
Regulations
Max maturity 3 years & up to 35% of NOF of Co.� Max maturity 3 years & up to 35% of NOF of Co.
� Out of NRE/NRO /Inward remittance
� Can be on R / NR Basis
� Not used in Agro Plantations / Real Estate
Business/TDR trading / Nidhi / Chit Fund
© PRAVIN P. SHAH & CO. 33
Loans by NRIs –Deposits
� NRI can place Deposits
� With Co / Firm / Sole Proprietary Concern / NBFC
� Pvt Arrangement / Public Deposit Scheme
� Max maturity 3 years
� Only from NRO A/c – No Repatriation allowed
� Not from Inward Remittance / Transfer from NRE /
FCNR A/c. balance
� Co. not in Agro Plantations / Real Estate
Business/TDR trading / Nidhi / Chit Fund
© PRAVIN P. SHAH & CO. 34
Loans by NRIs
� NRIs cannot give any other loans to any Co./
Firm / Person in India
� It would become an ECB
� Must comply with ECB Regulations & Restrictions
Only certain Lenders are eligible to lend� Only certain Lenders are eligible to lend
� Rate Cap
� End-use restrictions
� Involves Heavy penalties
© PRAVIN P. SHAH & CO. 35
Loans to NRIs
© PRAVIN P. SHAH & CO. 36
Loans to NRIs – By Banks
� Banks can grant Loans in India to NRIs:
� Loans can be against:
� Shares
� Imm. Property
For meeting Personal / Business purposes� For meeting Personal / Business purposes
� Not in restricted sectors – Agr/ RE Bus. / TDR
� Loan credited to NRE/FCNR/NRNR A/c
� Cannot be remitted abroad
� Repayment - NRO / NRE/FCNR/ Inward Remittance
Or by a close relative resident in India
© PRAVIN P. SHAH & CO. 37
Loans to NRIs- By Close Relatives
� Loan by Residents to Close Relative NRI/PIO :
� By credit to NRO A/c
� Cannot be remitted abroad
� Interest-free & minimum maturity of 1 year
Within the LRS limit of $200,000 / FY� Within the LRS limit of $200,000 / FY
� For Borrowers’ personal requirements / business in
India
� Not for Agr. / RE Business / Tdg in TDRs/ Nidhi
� Repymt by Inward remittance/NRO/NRE/FCNR/Sale
of Shares / Property against which loan granted
© PRAVIN P. SHAH & CO. 38
Gift by / to NRIs
© PRAVIN P. SHAH & CO. 39
Gift of Money
� Gift of money in forex by a Resident to NRI
� Earlier limit of $5,000 per annum
� Now under LRS
� Resident can remit up to $100,000 per recipientfor maintenance of close relatives
© PRAVIN P. SHAH & CO. 40
for maintenance of close relatives
� Gift of money in Rupees by Resident
� To NRI/PIO who is a Close Relative
� Credit to NRO A/c
� Within overall LRS limit of $200,000
Gift of Money
� Gift of money by a NRI to Resident
� No prohibition in FEMA
� Gift must be Genuine
� Consider s.56(2) for Donee
© PRAVIN P. SHAH & CO. 41
Meeting of Expenses
� Person resident in India can make payments
in Rupees
� For Boarding/Lodging / related Services / Travel to
and From and Within India of NRIs on a visit to
IndiaIndia
� For Medical Expenses in India of NRI who is a close
relative of payer
© PRAVIN P. SHAH & CO. 42
Gift of Shares
� Gift of shares by R to NR
� Not on Automatic Route of RBI
� Prior permission required
� RBI considers the following:
© PRAVIN P. SHAH & CO. 43
� RBI considers the following:
� Donee is eligible to hold the shares under FEMA
� Gift ≤ 5% of paid-up capital
� Sectoral caps are not breached
� Donee and Donor are close relatives u/s. 6 of
Companies Act
Gift of Shares
� Gift of shares by R to NR
� RBI considers the following:
� Total of all Gifts by way of shares by that Donor
to any Donees in a calendar year ≤ $50,000
© PRAVIN P. SHAH & CO. 44
� Earlier $25,000
� Application must include:
� Relationship between Donor-Donee
� CA’s Valuation
� NAV Certificate from MF for Units
Gift of Shares
� Gift of shares by R to NR
� Application must include:
� Certificate from Co. that Gift ≤ 5% of capital
� Reasons for Gift
© PRAVIN P. SHAH & CO. 45
∴ Genuineness of Gifts is very important
� Gift of foreign securities by NR to R
� General permission of RBI
Bank Accounts of NRIs
© PRAVIN P. SHAH & CO. 46
NRE A/c.
� Only NRIs / PIOs can open NRE A/c.
� Bangladesh / Pakistan Citizens need RBI Approval
� With Authorised Banks, Co-op Banks
� Cannot be opened by PoA Holder
Savings, Current, FD� Savings, Current, FD
� Credits:
� Any Credit in any Currency
� Notes, TCs, DDs, etc.
� Transfer from other NRE/FCNR A/c.
� Interest, Refund of EMD, etc.
© PRAVIN P. SHAH & CO. 47
NRE A/c.
� Debits:
� Local debts
� Remittances abroad
� Transfer to NRE / FCNR
� Investments in India in Shares / Property� Investments in India in Shares / Property
� Other permissible Debits
� Loans possible in certain cases against security of
NRE A/c.
� Repatriation allowed fully
© PRAVIN P. SHAH & CO. 48
NRE A/c.
� Joint A/c:
� Resident Close Relative can be added as a Joint A/c.
Holder
� Earlier not allowed
� On Former or Survivor Basis
� Resident Relative eligible to operate the A/c. as a Power
of Attorney Holder during lifetime of NRI/PIO
© PRAVIN P. SHAH & CO. 49
NRE A/c.
� Others:
� Jt A/c. with other NRIs allowed
� NRI can open NRE A/c during visit to India
� Overdrawing up to Rs.50,000 may be allowed by Bank
� Nomination allowed� Nomination allowed
� Interest not taxable
� Rate of Interest:
� Savings
� FD
© PRAVIN P. SHAH & CO. 50
FCNR(B) A/c.
� Only NRIs / PIOs can open FCNR A/c.
� Bangladesh / Pakistan Citizens need RBI Approval
� Can be opened in any Foreign Currency
� Only Term Deposits
All Debits / Credits permissible for NRE A/c.� All Debits / Credits permissible for NRE A/c.
� Interest on Half-yearly / Annual Basis
� Repatriable?
� JT A/c with Resident Close Relatives permissible
� Same as in case of NRE A/c
© PRAVIN P. SHAH & CO. 51
NRO A/c.
� Any PROI can open NRO A/c.
� Bangladesh / Pakistan Citizens need RBI Approval
� With Authorised Banks, Co-op Banks
� Savings, Current, FD
Credits:� Credits:
� Any remittances from abroad / Legitimate Dues
� Debits:
� All local payments
� Repatriation of Current Income – Dividend, Interest, Rent
© PRAVIN P. SHAH & CO. 52
NRO A/c.
� Other than Current Income NO Repatriation
� However, now relaxation
� Others:
� Jt A/c. with other NRIs / Residents allowed
� Resident PoA Holder can operate NRE A/c.� Resident PoA Holder can operate NRE A/c.
� Nomination allowed
� Interest Rates:
� Savings
� FD
© PRAVIN P. SHAH & CO. 53
Repatriation from NRO A/c.
� NRO = Non-Repatriable
� However, Repatriation now possible by PIOs:
� Who has retired from Employment in India
� Inherited assets from a PROI who was resident in IndiaInherited assets from a PROI who was resident in India
� Widow who is PROI and inherited assets of her Husband
who was an Indian Citizen & PROI
� Can remit up to $1m / FY on production of:
� Documentary Evidence of Inheritance
� CA’s Certificate for No Taxes
© PRAVIN P. SHAH & CO. 54
Repatriation from NRO A/c.
� Repatriation possible by NRIs / PIOs:
� Can remit up to $1m / FY
� Out of balances in NRO A/c. / Sale Proceeds of Assets /Assets acquired on Inheritance / Legacy
� On production of:
Documentary Evidence of Acquisition / Inheritance� Documentary Evidence of Acquisition / Inheritance
� CA’s Certificate for No Taxes
� Under Deed of Settlement by Parents / Close Relative andDeed taking effect on death of Settler
� Original Deed of Settlement
� CA’s Certificate for No Taxes
© PRAVIN P. SHAH & CO. 55
Repatriation from NRO A/c.
� Not available to citizens of foll. Countries
� If Sale Proceeds of Imm. Property – Not Available To:
� Pakistan, Bangladesh, Nepal, Bhutan, Sri Lanka, China,
Afghanistan, Iran
� If Sale Proceeds of Financial Assets – Not Available To:
� Pakistan, Bangladesh, Nepal, Bhutan
© PRAVIN P. SHAH & CO. 56
Credit Cards to NRIs
� Indian Banks can issue
� International Credit Cards
� To NRIs/PIOs
� Payment for all charges / dues should be out of
Inward Remittance / NRE/FCNRInward Remittance / NRE/FCNR
� Can use them for all payments
� Including for import of Goods & Services from India
� Except Lottery, Banned Magazines, Call Back services,
Sweepstakes
© PRAVIN P. SHAH & CO. 57
LRS
� Is the LRS of $200,000 available to NRIs?
� No
� Available only to Persons Resident in India
� If NRI becomes Resident (change of Status) then he
can avail of LRScan avail of LRS
© PRAVIN P. SHAH & CO. 58
Joint Holders
� Resident Individuals can add
� Close Relatives who are NRIs as Joint Holders
� In Resident Bank A/cs.
� On Former or Survivor Basis
� Close Relatives cannot operate A/cs. during
lifetime of Resident Holder
© PRAVIN P. SHAH & CO. 59
Foreign Invst. in RE
Foreign InvestmentForeign Investment
FDI in Co. FDI in Co. Real Estate ProjectsReal Estate Projects
NRINRI
Non-NRINon-NRI
NRINRI
© PRAVIN P. SHAH & CO. 60
Imm. Property
© PRAVIN P. SHAH & CO. 61
Buying of Imm. Property - NRIs
� Which type of IPs can be purchased?
� Any IP?
� Number of IPs?
�
� How can Payment be made?
� Inward remittances from abroad
� NRE/NRO/FCNR
� Can it be out of Travellers Cheque/Notes?
© PRAVIN P. SHAH & CO. 62
Buying of Imm. Property - PIOs
� Which type of IPs can be purchased?
� Any IP?
� Number of IPs?
�
� How can Payment be made?
�
� Can it be out of Travellers Cheque/Notes?
© PRAVIN P. SHAH & CO. 63
Buying of Imm. Property
� Reporting to RBI?
�
� Foll. Citizens cannot without RBI Approval:
� Pakistan / Bangladesh / Sri Lanka / China /Pakistan / Bangladesh / Sri Lanka / China /
Afghanistan / Iran / Nepal / Bhutan
� Buy or Transfer IP
� However, can take on lease for max. 5 years
© PRAVIN P. SHAH & CO. 64
Inheritance of IP
� NRI can inherit any type of IP in India
� PIOs
� Can INHERIT any IP from a PROI who had acquired
it as per applicable Exchange Control Law
� Can acquire any IP except Agr Land / Plantation /
Farm House by way of GIFT from a PRII / NRI / PIO
© PRAVIN P. SHAH & CO. 65
Renting of IP
� NRI/PIO can rent out their property
� Full repatriation of Rent allowed?
� Even if IP purchased out of NRO A/c?
�
Can NRI carry out any business ~ Warehousing?� Can NRI carry out any business ~ Warehousing?
�
© PRAVIN P. SHAH & CO. 66
Transfer of IP by NRI/PIOTYPE OF IP & TRANSFER BY TO
SELL / GIFT any IP NRI
SELL / GIFT any IP except Agr. Land / Farm
Houses / Plantations
NRI
SELL any IP except Agr. Land / Farm PIO
© PRAVIN P. SHAH & CO. 67
SELL any IP except Agr. Land / Farm
Houses / Plantations
PIO
GIFT any Res / Comm’l IP PIO
SELL / GIFT of Agr. Land / Farm Houses /
Plantations
PIO
Selling of IP by NRI/PIO
� Repatriation of Proceeds
� Auto. Route if:
� IP was acquired as per provisions of law
� Repatriation Less than
� Cost Price paid from Inward Remittance / NRE / FCNR� Cost Price paid from Inward Remittance / NRE / FCNR
� Gains credited to NRO A/c.
� For Residential Property =
� For Comm’l =
� Gains have to be credited to NRO A/c.
� Q. Can Gains be repatriated??
© PRAVIN P. SHAH & CO. 68
Acquisition by Non-NRIs
� Non-NRIs cannot acquire IP
� FEMA v FERA
� Citizenship relevant?
� Q. Position of Foreign nationals resident in India?Q. Position of Foreign nationals resident in India?
� Can they buy IP or do they need RBI Approvals?
� E.g.: Mr. Smith who is MD of Excel Auto Ltd and staying in
India for 3 years wants to buy a home in Gujarat?
� E.g.: Mr. Chang is on a 6-months Tourist visa wants to
buy a villa in Goa?
© PRAVIN P. SHAH & CO. 69
Foreign Cos.
� Foreign Cos. Cannot acquire IP in India
� If ForCo opens a Branch / Project Office
� It can acquire property for its own activity
� It must file a Form with RBIIt must file a Form with RBI
� Requires RBI permission for selling such a
property
© PRAVIN P. SHAH & CO. 70
RBI Permission
� If Permission required apply to:
� Chief General Manager
Exchange Control Dept
Reserve Bank of India
Mumbai 400 001
� No format has been prescribed
� Give full details and reasons for application
© PRAVIN P. SHAH & CO. 71
Commission to Agents
� Flats sold to NRIs
� Agents can be appointed
� Commission
� US$ 25,000 or 5% of Inward remittance – Higher� US$ 25,000 or 5% of Inward remittance – Higher
� Limit per Transaction
� Can be paid to Agent or Agent can deduct
commission and remit net amount to Builder
� Q. if NRI purchases out of NRO A/c.?
© PRAVIN P. SHAH & CO. 72
Foreign Consultants
� Foreign Consultancy Services for Indian RE
project
� Architect / Interior Designer / Lawyers
� Limit US $1 million / project
© PRAVIN P. SHAH & CO. 73
FDI in Real Estate
© PRAVIN P. SHAH & CO. 74
FDI & Instruments
© PRAVIN P. SHAH & CO. 75
Key Types of Foreign Invst.
Foreign Investment
Primary - FDI Secondary
Invst by PROI in
Capital of an Indian
Co.
Purchase by PROI
of Shs. Of Indian Co.
© PRAVIN P. SHAH & CO. 76
Direct Downstream Portfolio Off-Market
FIIs
NRIs / PIOs
Repatriable
Non-repatriable
Relevant Regulations
Consolidated FDI Policy – DIPP, Ministry of Commerce
© PRAVIN P. SHAH & CO. 77
FEMA Regulations –Mode of Investments
+ Reporting
AP Dir Circulars –RBI’s changes
from time to time
Relevant Regulators
FIPB –Cases
requiring Govt.
Approval
DIPP –Formulates FDI Policy
Part of FinanceMinistry
Part of Commerce
Ministry
© PRAVIN P. SHAH & CO. 78
Approval
RBI –Nodal
Regulatory Authority
Repatriable FDI
� Repatriable:
� Principal + Profits / Gains + Current Income
(Dividend / Interest) can be sent back abroad
� NRIs living in Nepal & Bhutan:
� Consideration must be by way of inward remittance
in free foreign exchange through Banks
© PRAVIN P. SHAH & CO. 79
FDI Prohibited
� FDI in following Sectors is Banned:
� Chit Fund / Nidhi
� Agricultural / Plantation (except certain areas)
� Real Estate business / Trading in TDRs
© PRAVIN P. SHAH & CO. 80
� Lottery / Gambling/ Betting / Casinos
� Atomic Energy
� Manufacturing of Tobacco & related products
� Sectors not yet opened to Private Sectors
Types of FDI
Foreign Direct Investment
© PRAVIN P. SHAH & CO. 81
Automatic Approval
No PermissionMoF/FIPB – Inflows
up to Rs.1200 cr.CCEA – Inflows
above Rs. 1200 cr.
Instruments
Foreign Direct Investment
© PRAVIN P. SHAH & CO. 82
EquityHybrid
Voting Non-Voting CCDs CCPS
Warrants
FDI in Real Estate
� General Prohibitions
� Real Estate Business
� Construction of Farm House
� Trading in Transferable Development Rights (TDRs)
© PRAVIN P. SHAH & CO. 83© PRAVIN P. SHAH & CO. 83
� ‘Real Estate Business’:
� Buying and selling of immovable properties
� Assignment of Development Agreements?
FDI in Real Estate – Guidelines
� 100% FDI allowed under Automatic Route subject to
conditions in Construction & Development Projects
� Projects Permitted
� Housing
� Commercial Premises
© PRAVIN P. SHAH & CO. 84© PRAVIN P. SHAH & CO. 84
� Commercial Premises
� Resorts
� Educational Institutions
� Recreational Facilities
� City & Regional Level Infrastructure
� Townships
Conditions
� Minimum Area
� Serviced Housing Plots – 10 hectares/25 acres
� Built-up area: 50,000 sq. mtrs. or 5,38,200 s.ft.
� Combination Project – Any one of above 2
© PRAVIN P. SHAH & CO. 85© PRAVIN P. SHAH & CO. 85
Combination Project – Any one of above 2conditions
� What is ‘built-up area’?
� What is included and what is excluded in it?
�
Conditions
� Investment – Minimum Capitalisation
� In case of WOS – US $10M
� In case of JV – US $ 5M
� FDI in a JV in 99:1 between Foreign & Indian
© PRAVIN P. SHAH & CO. 86© PRAVIN P. SHAH & CO. 86
� FDI in a JV in 99:1 between Foreign & Indian
Partner – What should be the min. capital?
� Securities Premium included in Min. Cap?
�
� Whether Preference Shares included?
�
Conditions
� Funds to be brought within 6 months of
commencement of business
� What is Commencement of Business?
� Would it be date when Co. buys land as its SIT
© PRAVIN P. SHAH & CO. 87© PRAVIN P. SHAH & CO. 87
� Would it be date of approval by Local Authority?
�
Conditions
� Original Investment locked-in for 3 years
� Entire Invst. or only what is brought in initially?
� If Invst. in Tranches?
� Is Invst. In excess of Min. Cap. also locked-in?
© PRAVIN P. SHAH & CO. 88© PRAVIN P. SHAH & CO. 88
�
� 50% project must be developed in 5 years
from date of obtaining all statutory clearances
Conditions
� Lock-in of Initial Investment
� Can Foreign Investor sell to another NR within 3
years?
� No outflow /remittance from Co.
Is lock-in on Investor or on Investment?
© PRAVIN P. SHAH & CO. 89
� Is lock-in on Investor or on Investment?
�
Exemptions
� Foll. 4 Conditions:� Minimum Area
� Minimum Capitalisation
� Lock-in for 3 years
� 50% Project Completion in 5 years
© PRAVIN P. SHAH & CO. 90© PRAVIN P. SHAH & CO. 90
� Not Applicable for 5 RE Projects:
� Hotels & tourism sector
� Hospitals
� SEZs / IT Parks
� Old Age Homes
� Education Sector
FDI in Real Estate – Issues
� Whether Agricultural Land can be acquired for
developing serviced housing plots?
�
� If FDI & non-FDI compliant projects, can Co. get
© PRAVIN P. SHAH & CO. 91© PRAVIN P. SHAH & CO. 91
FDI?
� Can FDI be made in a Co. engaged in leasing of
real estate?
� What if property is constructed and then leased?
Investment by NRIs and PIOs
� Prohibited Investments
� Investment in Agricultural Property,
Plantations & Farm Houses
� Trading in Real Estate and TDRs
© PRAVIN P. SHAH & CO. 92© PRAVIN P. SHAH & CO. 92
� Trading in Real Estate and TDRs
� Conditions of Press Note No. 2/2005?
� Can invest in smaller size projects also
�
Reporting under FDI
� Reporting of Inflow
� IndCo. receiving foreign funds should report to
Regional office (RO) of RBI
� Within 30 days of receipt in Advance Reporting
Form
© PRAVIN P. SHAH & CO. 93© PRAVIN P. SHAH & CO. 93
Form
� File FIRC with AD
� File KYC on NRI Investor with AD
� Report would be acknowledged by RO which
will allot a Unique ID No. (UIN)
Reporting under FDI
� Reporting of Issue of Shares
� After issue of Shares file FC-GPR with RBI
� Signed by MD/Director /CS
� File with AD
© PRAVIN P. SHAH & CO. 94© PRAVIN P. SHAH & CO. 94
� CS’ Certificate
� Valuation Certificate from CA / Auditor
� AD would submit to RO
� Annual Return of Foreign A&L with RBI
Loans to NRIs
© PRAVIN P. SHAH & CO. 95
Loans to NRIs- Housing Loans
� Bank / HFI can grant to NRI/PIO
� For acquisition / renovation/repairs of Residential HP
� Quantum of loans, margin money, repayment period shall
be at par with Resident loans
� Loan cannot be credited to NRE/FCNR/NRNR� Loan cannot be credited to NRE/FCNR/NRNR
� Fully secured by Equitable Mortgage of Property to
be purchased / Other assets
� Source of paying Interest / EMIs:
� NRE/FCNR/NRO A/c. or out of rental income
� Rental Income from Renting of Property
� Relative in India of borrower
© PRAVIN P. SHAH & CO. 96
Change of Status
© PRAVIN P. SHAH & CO. 97
Change of Status: R to NR
� Shares
� Existing Bank Accounts
� New Bank Accounts
� Loans / Overdrafts availed when he was a Resident
� Can they be continued?� Can they be continued?
� Payment of Interest & repayment of loans?
� Imm. Prop / Bullion / Movables?
� Insurance Policies?
� Directorship / Trustee/Karta
© PRAVIN P. SHAH & CO. 98
Change of Status: NR to R
� NRI becoming Resident
� S.6(4) of FEMA
� Foreign Shares
� Foreign Property
� Foreign currency� Foreign currency
� Foreign Bank Accounts?
� Jewellery/Cars/ Movables abroad?
� Insurance Policies abroad?
� Income earned on assets held abroad by NRIs who
have returned to India permanently can be retained
abroad – RBI Clarification
© PRAVIN P. SHAH & CO. 99
Overseas Invst by Indians
© PRAVIN P. SHAH & CO. 100
Liberalised Remittance Scheme
� LRS of RBI
� For Resident Individuals
� Foreign citizens?
� Minors?
US $200,000 equivalent / FY� US $200,000 equivalent / FY
� Earlier $50,000 - $100,000
� Any permissible Capital or Current A/c Transaction
� Bank A/c., Invst, Property, Expenses, Overseas Gifts
� Which Countries are prohibited?
© PRAVIN P. SHAH & CO. 101
Liberalised Remittance Scheme
� Out of owned funds?
� Borrow and Invest?
� Banks can lend for LRS?
� Setting-up of a Co. under LRS?
� Application-cum-Declaration Form� Application-cum-Declaration Form
� Income earned on assets held abroad under LRS
can be retained abroad and reinvested – RBI
Clarification
© PRAVIN P. SHAH & CO. 102
Other Investments
� General Permission for foreign securities :
� PRII can get a gift from PROI
� PRII can subscribe to under Cashless ESOP by a
foreign Co.
PRII can get inheritance from PRII / PROI� PRII can get inheritance from PRII / PROI
� PRII – Employee / Director of Indian Sub. Of
Foreign Co. can acquire foreign securities, if:
� Shares under ESOP are offered on uniform basis
� Annual Return is filed by Indian Co. with RBI
© PRAVIN P. SHAH & CO. 103
Remittances for Travel
� Basic Travel Quota for Private Visits
� $10,000 equivalent / FY / person
� Up to $3,000 in Cash Balance TC/ Forex Card
� Also for minors
� For excess RBI approval� For excess RBI approval
� Can get up to 60 days in Advance
� Other
� Business / Conferences/ Sp. Training / Maintenance
of patients for medical treatment / check-up/
attendants
� $25,000 equivalent / person
© PRAVIN P. SHAH & CO. 104
Remittances for Travel
� Formalities
� No endorsement on Passport unless requested
� Form A-2 to be filled
� Self-declaration & Air Tickets
� Surrender unspent forex within
� 90 days of return for Cash & 180 days for TCs
� Can retain up to $2,000 of Cash / TC / Card
� Can retain any amount of coins
� BTQ Limit N.A. if spent through CC
� Applicable to DC
© PRAVIN P. SHAH & CO. 105
Other Remittances
� Medical Treatment
� Up to $1,00,000 for treatment
� Excess Estimate from Doctor in India / abroad
� Self declaration
� Maintenance - $25,000
� Immigration
� Up to $1,00,000
� Self-declaration & A2
© PRAVIN P. SHAH & CO. 106
Other Remittances
� Employment abroad
� Up to $1,00,000
� Self-declaration & A2
� Study Abroad
� Students treated as NRIs
� Up to $1,00,000 or estimate from Foreign Institution
–whichever is Higher per Academic Year
� Self-declaration & A2
© PRAVIN P. SHAH & CO. 107
Thank You!!