Can NRIs buy property jointly with resident Indian?

Joint Property - Can NRIs buy property jointly with resident Indian

Some things in this world are still going fine jointly! Take property ownership in India, for instance – especially when we live in a country where the property is still one of the most coveted ways to connect with your roots.

For NRIs, purchasing a property in India is much more than an investment opportunity. It is a way of seeking connections to the native place – and also to find a ‘home’ for oneself. 

It helps if the property ownership is joint with a known relative or friend who is a resident Indian. 

Read: Saving yourself from fraud while buying or selling a property

What do you keep in mind while buying property jointly?

  • As with other things, the purchase of property by NRIs in India is also governed by guidelines issued by RBI. 
  • While the RBI has issued General guidelines for purchase of property by NRIs also, in some cases, special permission from RBI or approval from Government is required before making an investment in the immovable property by NRI.
  • RBI allows NRIs to jointly own a property with another NRI or a resident Indian. 
  • However, in cases where the resident Indian is otherwise ineligible to buy property, then the NRI will also not be allowed to buy the property with that resident Indian (irrespective of the financial contribution of the other person). 

Remember:

  • Residences or commercial property can be bought by NRIs freely. 
  • There is no restriction on the number of properties that can be purchased. 
  • There is no requirement of obtaining any specific permission in such cases and also no need to send any information to RBI for this purchase. 
  • There is no need to file any document with RBI in this regard. 
  • In case the interested NRI is unable to come to India for completing the property purchase, the same process can be carried out by giving a special POA (Power of Attorney) to another person. 

But,

  • For the purchase of any agricultural property or a farmhouse or plantation, NRIs need to apply for specific permission from RBI. 
  • However, NRIs can inherit the same from any resident Indian.

Read: Transfer of Property on the basis of Registered or Unregistered Will

What does the FEMA say?

  • There are no specific guidelines under FEMA for purchase of property by NRI jointly with resident Indians.  
  • An NRI is allowed to sell or gift any immovable property to any resident Indian. 
  • Any property can be gifted to NRI by an NRI other than agricultural property, plantation or a farmhouse.
  • The restrictions which apply to NRIs for purchase of agricultural property, farmhouse or plantation continue even if it is a joint purchase.  
  • The transactions have to be routed through proper banking channels under FEMA and RBI guidelines.
  • For all purposes of investment in real estate, NRIs are treated at par with the PIOs.

Read: How to obtain probate of a Will

What if a person becomes an NRI after buying property in India?

  • In case an individual has bought property in India and acquires an NRI status after that, he can continue holding the property
  • All taxes will apply to the property as per the laws of the country

So Yes! Relax NRIs – You CAN buy property jointly with resident Indians or other NRIs. Make sure you adhere to RBI and FEMA rules regarding the same. 

Impact of divorce on joint property in India

Impact of divorce on joint property in India

At the time of divorce, couples are often confused and uncertain about the division of property held jointly by them. The problem arises because eventuality of separation is not contemplated while purchasing jointly and there is no proper documentation.

Matrimonial responsibilities are no longer a domain of any single spouse. Both have to participate equally. Joint ownership of husband and wife, in property purchased after marriage, is a common feature. There are various reasons for preferring joint ownership in property.

  • Rebate in stamp duty for women investors
  • Tax benefits associated with joint ownership
  • Loan eligibility increases and repayment process become easy

When couples decide to part away, there are many issues to be addressed and the most important being the division of joint property. 

Many times, estranged couples have approached us to find a solution to their problem of division of property. We generally advise them to decide the same with mutual consent because litigation in this regard can be quite toiling.

Division of property at the time of divorce:

1.    Division by mutual consent: Division of property held jointly, can be smooth if there is a mutual understanding among the two for:

  • Ownership
  • Equity
  • Contribution

The partners get their share as per the equity/contribution.

2.    Proof of Contributions made for the purchase of property: The person who holds the title is the owner even if the other partner has contributed the purchase money in total. The other partner has to prove the financial contributions made by him to get the due share.

3.    Self-acquired property or inherited property: The self-acquired property is not part of any settlement at the time of divorce. The property to be inherited in the future does not become part of the settlement.  If the ancestral property has been partitioned or has devolved as per succession law and husband or wife have got their shares, then such property becomes self-acquired property qua the spouses and is not subject to settlement at the time of divorce.

4.    Joint loan: If the joint property has been bought on loan payable by both, then the parties have to split their liabilities accordingly, or one partner can bear the loan amount and be compensated by other.

5.    Disposal of joint property as per Section 27 of Hindu Marriage Act: The Hindu Marriage Act, 1955 contains a provision u/s 27 of the Act, for disposal of property presented jointly to the spouses, at or about the time of marriage. Joint property purchased after marriage is outside the purview of this section. However, if the parties have reached a compromise regarding such properties, Court may record the same at the time of passing the decree.

6.    Maintenance: Right to maintenance includes right to residence also after divorce. However, the right depends upon the terms of the decree of divorce. In Hindu law, any party can apply for the grant of permanent alimony and maintenance pendent lite. 

The amount of maintenance if not paid as directed, can be recovered from the property of the person liable to pay the same.

Smooth Sailing:

  • It is always advisable to engage a lawyer and prepare the documents relating to purchase of the property taking care of all reasonably expected eventualities. Proper documentation defining the claims based on equity makes division an easy affair later.
  • Selling the property and sharing the proceeds is also an option.
  • In case the joint property is a dwelling house, one can retain the house, and other can be compensated monetarily.

Co-owners own every part of the joint property together

Landmark Judgement on Property Ownership

The Apex court once again upheld it’s principle that co-owners of a joint property enjoy the ownership of the whole property along with other joint owners.

A layman’s explanation of this judgment can be expressed in the following method. Let us say that A and B are co-owners of a joint property. Now the joint property has four chairs. By the apex courts judgment A and B shall not have a complete ownership of two shares, instead they both have a fifty percent ownership of all the four chairs.

Thus the apex court in the judgment for Om Prakash vs Mishri Lal upheld this principle. However a valid interpretation of this judgment is also that all the co-owners also have equal share of responsibility. That is A and B will have to pay equally for the repairing and maintaining of the chairs.

Needless to ownership of the property is not restricted to anything. All the articles that are present in the property will be covered.

This judgment is considered as a landmark in the field of property ownership and defining which property comes under the ownership is still considerably vague.

Regardless of this, this is a commendable judgment which shall put much of ongoing and future litigation to rest.

Click here to download full Judgement