Property Abroad by Residents: The Routes FEMA Permits
LRS is the everyday route; rule 21 of the OI Rules lists the rest.
A resident Indian who wants a flat in Dubai or a cottage in Scotland needs a FEMA route for it. Since August 22, 2022, those routes sit in rule 21 of the Foreign Exchange Management (Overseas Investment) Rules, 2022 and paragraph 25 of the Overseas Investment Directions, 2022. They replaced the older 2015 regulations on acquiring property outside India.
For most individuals the practical route is the Liberalised Remittance Scheme. The other routes cover property that arrives by inheritance or gift, money already held abroad lawfully, and joint purchase with a non-resident relative.
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The Permitted Routes Under Rule 21
A person resident in India may acquire immovable property outside India:
- check_circleBy inheritance, gift or purchase from a resident who acquired it under the foreign exchange law in force at that time.
- check_circleFrom a non-resident by inheritance.
- check_circleFrom a non-resident by purchase out of foreign exchange held in a Resident Foreign Currency (RFC) account.
- check_circleFrom a non-resident by purchase out of remittances under LRS. Remittances of resident relatives may be pooled, if each relative complies with LRS terms.
- check_circleJointly with a relative who is a person resident outside India.
- check_circleOut of the income or sale proceeds of assets (other than ODI) lawfully acquired overseas.
The LRS Route in Practice
LRS lets a resident individual remit up to USD 250,000 per financial year (April-March) for permitted current and capital account purposes combined, and acquiring immovable property abroad is one of the listed capital account purposes. A property costing more than one person's annual limit can be funded by pooling remittances from resident relatives, each within their own limit.
LRS is open only to resident individuals, not to companies, firms, HUFs or trusts. Banks may not lend to residents to fund capital account remittances under LRS, so the purchase money must be the remitter's own.
How CCFE Tests This
The usual MCQ lists four funding sources and asks which one lets a resident buy property abroad. RFC balances and LRS remittances are right; a rupee loan from an Indian bank is the planted wrong answer. A second pattern tests the entity limits and swaps the 15% and 10% figures between initial and recurring expenses. A third gives a returning NRI with a London flat and asks whether RBI approval is needed: it is not, under section 6(4).
Older Notes Cite the 2015 Regulations
Material written before August 2022 refers to the FEM (Acquisition and Transfer of Immovable Property Outside India) Regulations, 2015. Those regulations were superseded on August 22, 2022; rule 21 of the OI Rules and paragraph 25 of the OI Directions now govern, so quote the 2022 framework when a question asks which rule applies.
FAQs
Can a resident Indian buy property abroad?expand_more
Yes. A resident individual may buy property outside India with LRS remittances, with RFC account funds, jointly with a non-resident relative, or out of income from lawfully held foreign assets. Property can also be acquired by inheritance or gift.
Can family members combine LRS limits to buy a house abroad?expand_more
Yes, if each family member is a co-owner of the property. Remittances under LRS may be consolidated for family members who each comply with the scheme's terms and stay within their own limit, but RBI does not allow clubbing for capital account transactions by members who are not co-owners of the investment.
Does a returning NRI need permission to keep property abroad?expand_more
No. Under section 6(4) of FEMA, a resident may continue to hold, own and transfer property acquired while non-resident or inherited from a non-resident.
Can an Indian company buy property abroad for its staff?expand_more
Yes, if it has an overseas office. Remittances are capped at 15% of average annual turnover of the last two years or 25% of net worth, whichever is higher, for initial expenses, and 10% of turnover for recurring expenses.
Next steps
- LRSarrow_forward
- RFC Accountarrow_forward
- Overseas Portfolio Investmentarrow_forward
- NRI Propertyarrow_forward
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