purchase of immovabe property

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CA Devender Chauhan (Querist)
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31 January 2011 Can an Indian Company which is registered under Indian Companies Act 1956 & whos 100% shares are held by some foreign company puchase immovable property in India?

& if yes what are the requirement to be fulfilled?

RAMESH KUMAR VERMA

RAMESH KUMAR VERMA (Expert)
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02 February 2011 A foreign company which has established a Branch Office or other place of business in India, in accordance with FERA / FEMA regulations, can acquire any immovable property in India, which is necessary for or incidental to carrying on such activity. The payment for acquiring such a property should be made by way of foreign inward remittance through proper banking channel. A declaration in form IPI should be filed with Reserve Bank within ninety days from the date of acquiring the property. Such a property can also be mortgaged with an Authorised Dealer as a security for other borrowings. On winding up of the business, the sale proceeds of such property can be repatriated only with the prior approval of Reserve Bank. Further, acquisition of immovable property by entities who had set up Branch Offices in India and incorporated in Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank to acquire such immovable property. However, if the foreign company has established a Liaison Office, it can not acquire immovable property . In such cases, Liaison Offices, can take property by way of lease not exceeding 5 years.

for more information link is :-

https://www.rbi.org.in/scripts/faqview.aspx?id=33

CA Devender Chauhan

CA Devender Chauhan (Querist)
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02 February 2011 Is a indian company with 100% foreign holding is treated as branch office or liason office or other place of business under fema? Or should we treat it as resident Indian Company because it is incorporated under Indian Companies Act 1956 & purchase the immovable property as an Resident Indian Company.

Aashok Kumar Sharma

Aashok Kumar Sharma

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10 August 2024 Yes, an Indian company with 100% foreign holding can purchase immovable property in India, subject to certain conditions and compliance with relevant regulations. Here’s a detailed overview of the requirements and classification under FEMA:

### **1. Can an Indian Company with 100% Foreign Holding Purchase Immovable Property in India?**

Yes, an Indian company with 100% foreign shareholding can purchase immovable property in India. However, the following requirements must be met:

#### **Requirements:**

**a. **Compliance with Foreign Exchange Management Act (FEMA):**
- **Regulations:** The purchase must comply with FEMA regulations and the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2014.
- **Permissible Activity:** The foreign company or its wholly-owned subsidiary in India must use the property for business purposes. For example, if the property is purchased for office use, it should be consistent with the business activities of the Indian company.

**b. **Corporate Structure:**
- **Incorporation:** The Indian company must be incorporated under the Indian Companies Act, 1956, or the Companies Act, 2013. It should be a legal entity in India, regardless of the foreign ownership.
- **Registration:** Ensure that the company is registered with the Registrar of Companies (ROC) and is compliant with all relevant corporate laws.

**c. **FEMA Compliance:**
- **Form FC-GPR:** If the foreign investment is in the form of equity, the Indian company should file Form FC-GPR (Foreign Collaboration - General Permission Route) with the Reserve Bank of India (RBI) within 30 days of the issue of shares to the foreign entity.
- **Form FC-TRS:** If the property purchase involves the transfer of shares or ownership interests, Form FC-TRS (Foreign Contribution - Transfer of Shares) must be filed.

**d. **Stamp Duty and Registration:**
- **Stamp Duty:** The purchase of immovable property in India is subject to stamp duty, which varies depending on the state in which the property is located.
- **Registration:** The property transaction must be registered with the local sub-registrar to make the transaction legally binding.

### **2. Classification Under FEMA:**

**a. **Indian Company vs. Branch or Liaison Office:**
- **Indian Company:** An Indian company with 100% foreign holding is not considered a branch office or liaison office. It is treated as an Indian company incorporated under Indian law.
- **Branch/Liaison Office:** Branch offices and liaison offices are subject to different regulations under FEMA and are primarily for foreign companies looking to establish a presence in India without full incorporation.

**b. **Resident Status:**
- **Resident Company:** The Indian company is treated as a resident Indian company under FEMA because it is incorporated under Indian law. The nationality of the shareholders does not change the residency status of the company.
- **No Distinction:** The Indian company operates under the same regulations as other Indian companies, despite the foreign ownership.

### **Summary of Steps for Purchasing Immovable Property:**

1. **Ensure Compliance:**
- Verify compliance with FEMA regulations and obtain necessary permissions if required.
- File Form FC-GPR for foreign equity investment if applicable.

2. **Complete Documentation:**
- Ensure proper documentation for the property transaction, including sale agreements, stamp duty payment, and registration.

3. **Adhere to Corporate Laws:**
- Ensure the company is in good standing with ROC and other regulatory authorities.

4. **File Relevant Forms:**
- Submit any required forms to RBI and other authorities as needed.

By following these guidelines, an Indian company with 100% foreign ownership can legally purchase immovable property in India while adhering to all regulatory requirements.

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