RBI says Overseas Home Purchase Curbs Remain
For Indians buying that dream house in an exotic foreign location will continue to remain a dream even if they have the resources. RBI has clarified that it has not withdrawn the restriction on buying immovable property overseas even as it increased the amount, which Indians could freely remit overseas, to $1.25 lakh form $75,000 earlier.
In its bi-monthly policy on Tuesday, RBI partially rolled back the restrictions it has introduced on forex remittances in August, 2013 in the wake of the rupee going into a free fall against the dollar. The policy statement said the amount Indians could remit overseas 'without end-use restrictions' was increased to $1.25 lakh. The only condition was that the remittance should be for a legal activity. The relaxations were seen as a mark of renewed confidence in the rupee, which had gained ground against the dollar in recent months. In August 2013, RBI cut the remittance limit to $75,000 from $2 lakh earlier. It also amended the Foreign Exchange Management (Permissible Capital Account Transactions) Regulations, 2000, to bar any remittance for acquisition of immovable property abroad.
RBI's reference to the August 2013 circular and the statement that all other terms remain unchanged would mean that existing restriction on property purchase continue, says Raj Ramachandran, Partner, J Sagar Associates. "Generally there is a discomfort over acquiring property assets outside India. May be there is a feeling that it is not in the economy's long-term interest if someone sends $1.25 lakh every year and uses it for immovable property outside India as it may not come back. Whereas financial investments will come back at some point," said Ramachandran.
Late evening on Monday, RBI issued a notification to implement its policy measure to relax the remittance limit. While the circular reiterated the policy stance of hiking the remittance limit, it also contained a provision that all other terms and conditions of the earlier directive remained unchanged. When contacted, RBI clarified that it has not yet relaxed its restriction on Indians buying immovable property overseas.
This means that individuals can send $1.25 lakh for any purpose including investing in financial instruments, gifting, education or healthcare but they still cannot buy property overseas.
Times of India, New Delhi, 05-06-2014