India's real estate market has consistently been an attractive investment option for the global Indian diaspora, including Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs). While the sentimental value of owning property in one’s homeland is undeniable, the financial incentives for such investments are equally strong. However, the legal regulations surrounding property ownership for OCIs are complex and differ from those applicable to resident Indians and NRIs.This blogpost delves into the issue of Transfer of Immovable property without consent involing an OCI party and provides comprehensive guide for OCIs to navigate through Indian real estate market. The guidelines for the acquisition and transfer of immovable property by Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) are outlined in the Master Direction titled Acquisition and Transfer of Immovable Property under the Foreign Exchange Management Act, 1999.

According to these guidelines, an NRI or OCI holding a valid Indian passport is permitted by the Reserve Bank of India (RBI) to acquire immovable property in India through purchase. Additionally, they are allowed to transfer immovable property in accordance with applicable laws.

Understanding FEMA

Property ownership By OCIs

OCIs have the same property ownership rights as NRIs, allowing them to purchase residential and commercial properties in India. However, they are prohibited from acquiring agricultural land, plantation property, or farmhouses. This restriction is intended to safeguard India's agricultural resources and ensure they remain with resident Indians actively involved in farming. Their transaction is governed by the Foreign Exchange Market Regulation Act ( For brevity, FEMA). The Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018 specify the conditions under which NRIs and OCIs can purchase, transfer, or inherit property in India. These regulations are designed to protect foreign investors' interests while ensuring regulatory oversight of India's economic framework.

A foreign national under this act is the one who qualifies as a ‘person resident in India’ under Section 2(v) of FEMA, 1999 that is, who is permitted to purchase immovable property in India. However, they must obtain necessary approvals and comply with any requirements set by relevant authorities, such as the State Government. If required by any authority, the individual bears the responsibility of proving their residential status in accordance with FEMA regulations. Under Section 2(v) of the Foreign Exchange Management Act (FEMA), 1999, a "Person Resident in India" is defined as an individual who has resided in India for more than 182 days in the preceding financial year, excluding those who have left the country for employment, business, or any purpose indicating an indefinite stay abroad. Conversely, a person who has come to or stays in India for employment, business, or any purpose suggesting an indefinite stay is also considered a resident under FEMA.

Properties NRIs/OCIs can acquire under FEMA

Under the 2018 regulations, NRIs and OCIs are allowed to acquire immovable property in India, subject to certain restrictions:

• Allowed Properties: NRIs and OCIs can purchase residential and commercial properties in India.

• Restricted Properties: They cannot buy agricultural land, farmhouses, or plantation properties.

Transfer of Property by NRIs and OCIs

As per the regulations, NRIs and OCIs can transfer immovable property in India under specific conditions. They can transfer any type of property, including agricultural land, farmhouses, and plantations, to Indian residents without restrictions. However, when transferring property to other NRIs or OCIs, they are limited to residential and commercial properties and cannot transfer agricultural land, farmhouses, or plantations.

After the Asha John Divianathan v. Vikram Malhotra [2021 INSC 121] ruling by the Supreme Court in 2021, In this case, the Supreme Court ruled that a foreign citizen must obtain prior approval from the Reserve Bank of India (RBI) to transfer immovable property through a gift deed. Any such transfer made without RBI’s permission is considered invalid. This ruling specifically applies to foreign nationals and does not extend to NRIs or OCIs.

NRIs and OCIs do not require special permission from the RBI to purchase residential or commercial property in India, nor are they obligated to inform the RBI about such transactions. They can buy multiple properties under these categories as per RBI regulations and income tax laws. Under RBI’s general permission, an NRI can purchase property individually or jointly with another NRI and is allowed to gift or sell the property to another NRI, OCI, or Indian resident. If they cannot be physically present in India, the transaction can be carried out by an agent with a legally binding power of attorney. this agent can be a trusted person, family member, or friend. However, NRIs and OCIs are prohibited from purchasing or transferring agricultural land, plantation property, or farmhouses, except when these properties are inherited. In such cases, they can only transfer them to an Indian citizen residing permanently in India. Dealing with the main issue of unlawful transfer of property of NRI/OCI without their consent and the remedies available .

The implication of the 2021 judgment developed the legal principles underscoring the importance of adhering to regulatory requirements in property transactions involving foreign nationals. While the case specifically dealt with a foreign national, it highlights the necessity for NRIs and OCIs to ensure compliance with the prevailing legal framework to prevent unauthorized or disputed property transfers.

Under the FEMA 1999, the unlawful transfer of property without consent refers to the sale, transfer, or acquisition of immovable property in India without the owner's authorization or in violation of FEMA guidelines. Some key aspects include:

1. Unauthorized Sale or Transfer

• Transferring NRIs’ or OCIs’ property without their explicit consent is illegal.

• Fraudulent sales using forged documents or misuse of Power of Attorney violate FEMA.

2. Encroachment or Illegal Possession

• Illegally occupying NRI/OCI-owned property without permission amounts to an unlawful transfer.

• Any such transaction is void under FEMA and may attract criminal and civil liabilities.

Legal Remedies Against Such Unlawful Transfer

Unauthorized property transfers under FEMA, when conducted without proper consent, are deemed illegal and can trigger severe consequences which may be:

1. The Enforcement Directorate (ED) may launch investigations into such transactions, leading to the imposition of substantial fines and legal action under relevant FEMA provisions, including Sections 13 and 37. Additionally, the property involved may be subject to confiscation, and the transaction itself can be declared null and void.

   
   

2. Seeking Civil Remedies - Victims can file a civil suit in an Indian court for:

   • Cancellation of the fraudulent transfer.

   • Declaration of rightful ownership.

   • Compensation for damages suffered due to the unlawful transaction.

   • If the transfer involved fraudulent documents or misrepresentation, an injunction can be sought to prevent further dealings in the property.

   
   

3. Criminal Action for Fraud and Forgery - If the unauthorized transfer involved forgery, fraud, or misrepresentation, a criminal complaint can be filed under Indian Penal Code (IPC) Sections 420 (cheating), 467 (forgery), and 468 (forgery for cheating) and Prevention of Money Laundering Act (PMLA), 2002, if money laundering is suspected.

   
   

4. Reporting to the Reserve Bank of India (RBI) - Since FEMA violations fall under RBI’s regulatory framework, complaints regarding unlawful foreign property transactions can be escalated to the RBI.

   
   

5. Restoring Ownership through the Tribunal and Courts - Victims can approach the Adjudicating Authority under FEMA or relevant civil courts to invalidate the unlawful transfer and reclaim the property.

These remedies serve both to rectify the unlawful transfer and to deter future violations of FEMA guidelines, ensuring that property transactions in India are conducted lawfully and with the proper consent of all parties involved.

The unlawful transfer of property under FEMA, 1999 poses significant legal and financial risks, particularly for NRIs, OCIs, and foreign investors. While the law provides strict regulations to prevent unauthorized transactions, cases of fraudulent transfers, illegal possession, and misuse of Power of Attorney continue to surface. However, despite the safeguards and remedies given under the act, challenges remain in the enforcement and execution of FEMA provisions, particularly due to delays in legal proceedings, lack of awareness among property owners, and loopholes in property registration processes. To strengthen the framework, enhanced digital monitoring, stricter verification protocols, and faster adjudication mechanisms should be implemented. A more transparent and accessible legal system will not only deter illegal transactions but also boost investor confidence in India’s real estate market.