RBI GUIDELINES

RBI  GUIDELINES

Can a foreign national of non-Indian origin resident outside India purchase immovable property in India?

No. A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India. But, he/she may take residential accommodation on lease provided the period of lease does not exceed five years. In such cases, there is no requirement of taking any permission of or reporting to Reserve Bank

Can a foreign national who is a person resident in India purchase immovable property in India?

Yes. But the person concerned would have to obtain approvals, and fulfil the requirements, if any, prescribed by other authorities, such as the concerned State Government, etc. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan would require prior approval of Reserve Bank. Such requests are considered by Reserve Bank in consultation with the Government of India.

Can an office of a foreign company purchase immovable property in India?

Yes - 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 the prescribed form 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 the 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 cannot acquire immovable property. In such cases, Liaison Offices  can take property by way of lease not exceeding 5 years.

Can Foreign Embassies / Diplomats / Consulate General purchase / sell immovable property in India ?

Yes - Foreign Embassies / Diplomats / Consulate Generals can purchase and sell any immovable property other than agricultural land / plantation property / farm house in India with prior clearance from the Government of India, Ministry of External Affairs. The payment should be made by foreign inward remittance through normal banking channel.

If a foreign national is a person resident in India as per the provisions of Section 2(v) (i)B of the FEMA, 1999, does he require approval of Reserve Bank to purchase any immovable property in India ?

A foreign national resident in India does not require approval from Reserve Bank from FEMA angle, but approvals if any required in terms of regulations prescribed by other authorities such as the concerned State Government etc. will have to be obtained by him / her. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan requires specific prior approval of Reserve Bank.

Can foreign nationals of non-Indian origin resident in India or outside India who had earlier acquired immovable property under FERA with specific approval of Reserve Bank continue to hold the same? Can they transfer such property?

Yes, they may continue to hold the immovable property. However, they can transfer the property only with the prior approval of Reserve Bank.

Can residential/commercial property be mortgaged by a foreign national of non-Indian origin ?

A foreign national of non-Indian origin can mortgage only with prior approval of Reserve Bank and a foreign company which has established a Branch Office or other Place of business in accordance  with FERA/FEMA regulations has general permission to mortgage the property with an authorized dealer in India.

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ADOPTIONS AMONG HINDUS

ADOPTIONS AMONG HINDUS

What are ingredients of valid adoption by Hindu?

A separate act “The Hindu Adoptions and Maintenance Act 1956” deals with adoption by Hindu. The Act prescribes following requisites for valid adoption.

A. The person who is adopting must have capacity, and right to take adoption.

B. Similarly, the person who is giving in adoption must have capacity to give in adoption.

C. The person who is being adopted must be capable of being adopted.

D. The process of adoption shall be in conformity with the provisions of the Hindu Adoption and maintenance Act 1956.

E. No payments/shall be received or given in consideration of adoption.

Who are persons capable of giving in adoption?

Only father, or mother, or guardian has capacity to give the child in adoption. This does not include adoptive father or mother. Guardian means the person having the care of the person of child or property or both. It also includes guardian appointed by the Will of father or mother or guardian appointed by the court.

If the father is alive, he shall alone have right to give in adoption, but subject to consent of his wife (mother of the child). But if the mother has completely and finally renounced the world, or converted to other religions, or has been declared as of unsound mind by the competent court, consent of mother is not required.

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The mother may also give the child in adoption if the father is dead, or has completely and finally renounced the world, or converted to other religion or has been declared as of unsound mind by competent court.

The guardian may also give the child in adoption only with previous permission of the court. He may adopt the child as his adopted child also.  We all know that the guardian comes into picture only on death of natural parents. Apart from death of natural parents, the guardian may also give in adoption, if both the parents have completely and finally renounced the world, or have abandoned the child, or have been declared as of unsound mind by competent court, or where the parentage of the child is not known.

Can a Hindu Woman take a child in adoption?

Generally it is male Hindu, who is a major and of sound mind, but with the consent of his surviving wife not otherwise disqualified, has capacity to take a child in adoption.However, a Hindu Woman has also capacity to adopt if she satisfies the following conditions:

A. She is major

B. She is of sound mind

C. She is unmarried

D. If married, the marriage is dissolved, or husband is dead, or husband has completely and finally renounced the world, or has been converted to other religion or declared as of unsound mind by competent court.

What are the requirements of the child to be adopted?

The child to be adopted may be boy or girl must be Hindu, and has not been previously adopted. The child must be unmarried, but if the custom applicable to the parties permit the adoption of married, such children may also be adopted. Importantly the child must not have completed fifteen years of age, unless customs practiced by parties allow adoption of persons who have completed fifteen years of age.

Can person having children adopt a child?

In case of a male child being adopted, the adoptive parents must not have a Hindu Son, Son's Son, or Son's Son's Son, living (grandson, great grandson) at the time of adoption, likewise in case of adoption of female child, the adoptive parents should not have a Hindu Daughter, or Son's Daughter living at the time of adoption.

Can male major Hindu who is 20 years age adopt female child?

The Hindu Adoptions and maintenance Act 1956, stipulates certain restrictions in case of adoption of female by a male or adoption of male by female. In case of Hindu male adopting a female, the adoptive father must be at least twenty one years older than the female to be adopted. So a male who is twenty years old cannot adopt a female child.

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REDEMPTION AND FORE-CLOSURE

REDEMPTION AND FORE-CLOSURE

What is right of redemption?

This is a very important right of the mortgagor, which the law protects. Generally law stands in favour of the weaker party and mortgagor being debtor; law safe guards his right. Section 60 of Transfer of Property act deals with Right of Redemption which is a right available to mortgagor to get back the (redeem) the property mortgaged that is after any time, the principal amount has become due, on payment of all the dues. The mortgager may demand from the mortgagee, the mortgage deed, all the documents, and if the property had been delivered, to deliver the possession of the property. The entire cost of this process to be borne by the mortgagor. He may also direct the mortgagee to deliver the deed; documents, possession of the property so any third person. If the mortgage has been effected by registered document, the redemption or re-conveyance deed also need to be registered.

This right of redemption is available before the mortgagee files a suit for enforcement of mortgage.

Whether partial redemption is allowed?

The mortgage is indivisible Section 60 of the Transfer of property act does not allow partial redemption; one of the mortgagors cannot redeem part of the mortgaged property by paying the proportionate amount. If redeemed, the entire property has to redeem. The only exception is that if the mortgagee is a creditor himself and is responsible for breaking the integrity of the mortgage by allowing the co-mortgagor to redeem partially or when he acquires the interest of one of the co-mortgagors.

What is clog on redemption?

Clog means obstruction. A mortgagor has the right to enjoy hold of the property as he was entitled before the mortgage. If that right is prevented/restricted, such conditions are called clogs. A term/condition in a mortgage transaction is treated as clog, if it is unreasonable.

What is Foreclosure?

This is a right available to the mortgagee. The relevant section is 67 of Transfer of property act. This right can be exercised if there are no contrary conditions in the mortgage deed and after the mortgaged money has become due and before the mortgagor gets decree of redemption, or mortgaged money has been paid, deposited. In simple terms the right can be enforced on failure of the mortgagor to repay the money borrowed on due date. The mortgagee may obtain a decree from the court, that the mortgagor is prohibited from right to redeem the property or property be sold. This is suit for foreclosure. However the remedy depends upon the nature of the mortgage.

In the simple mortgage the foreclosure is not available. Remedy is either proceed against the mortgagor personally or per sale of the property mortgaged, so also in care of Usufructuary mortgage, where the mortgagee is in possession of the property and continues to be so until the debris repaid on full.  In case of conditional sale, the mortgagee matures into sale on the failure of the payment of the debt, so the mortgage may foreclosure depriving the right of redemption. In English mortgage they may bring a suit for sale of the property. In case of mortgage by deposit of titles deeds. The remedy is sue for personal decrees or for sale of the property.In anomalous mortgage, the remedy depends upon the terms of mortgage.

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FAQ ON BANKING(HOME LOANS)

FAQ ON BANKING(HOME LOANS)

What are Annual / Monthly reducing Balance?

Reducing balance means the time at which interest is calculated and applied to a Loan account.  Repayment of home loan is by way of equated installments paid every month (EMI’s). But housing finance companies adopt different modes of adjusting these monthly repayments towards the Loan account and to bring down the Loan amount due. 

In annual reducing balance method, the monthly repayments received from the Borrower are kept in a suspense account and transferred to the Loan account only once in a year generally on 1st of April. To be more clear, if your Loan amount as on 1st April, 2008 is Rs.5,00,000/- and you  pay monthly installments of Rs.10,000/-, your entire payment of Rs.10,000 X 12 = 1,20,000/- will be adjusted towards Loan amount only on 01/04/2009 and interest from 01/04/2008 to 31/03.2009 will be calculated on Rs.5 lakhs. This works out very costly as you will be paying interest on Rs.5,00,000/- for the entire 12 months.

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In case of monthly reducing balance method, the repayments are credited to your Loan account on a particular day in a month, though you would have paid the installment much earlier to that date.  If some particular housing finance company has fixed 15th of every month, for such adjustment, and if you pay on 5th of every month, your Loan amount gets reduced only on 15th of that month. Most of the housing finance companies have shifted from annual reducing balance method to monthly reducing balance method.  The most preferable mode of payment of EMI is daily reducing method, where under your Loan amount gets reduced on the very day of your repayment.

What is fixed and floating rate ?

These are two different modes of interest calculation. Floating rate is also called as Variable rate. In fixed rate, the rate of interest is fixed and will not change in the entire period of the Loan. Fixed rate will be higher than the floating rate, as it is not affected by market fluctuations. In floating rate or variable rate, the rate of interest changes depending upon market conditions. It may increase or decrease depending upon the change in the market conditions. The repayment period also varies, but equated monthly installments remain the same. Presently, floating rate is most favoured by lending institutions. If the repayment period is more than five years, it is advisable to prefer fixed rate.

What is flat rate of interest ?

In flat rate, the interest is charged on the full amount of Loan for the entire period, irrespective of your repayments. If you have availed Loan of rupees ten lakh repayable in ten years, interest will be charged on rupees ten lakh for all the ten years, ignoring your repayment.

What is fore closure fee ?

This is a fee charged by the bank / financial institutions if loan account is closed before the agreed period. If the bank and Borrower have agreed for a repayment period of five years and contrary to such an agreement, the Borrower prefers to close down the loan account at the end of the 2nd year, the bank imposes some penalty to compensate the loss of interest to the bank. Such penalty is called fore closure fee which is generally 1% of loan  amount outstanding.

With the intension of removing discrimination between existing and new borrowers and also to create healthy competition among banks resulting in offering of the floating rates at competitive pricings, the foreclosure charges/ prepayment penalty was banned the same for floating rates interest customers, from June 2012. This has also brought uniformity across the banking system.

What is pre – EMI interest ?

Home loans are repaid in monthly installments, which are  called as equated monthly installments (EMI). Normally, payment of EMI commences after the entire loan amount is disbursed. In case of purchase of a house, entire loan component is disbursed at the time of registration. In case of construction, loan will be disbursed in stages based on progress of construction and final installment on completion of construction and then the EMI commences. The interest accrued on the loan amount until the final disbursement is called pre-EMI interest. This  has to be paid by the borrower before the commencement of EMI.

For what purposes housing loan can be availed ?

Housing loan can be availed for the following purposes :

· For purchase of  plot;

· For purchase of ready-built house;

·For purchase of an apartment/flat;

· For purchase site-cum-construction purposes

· For repair and renovation of the existing building.

What are the eligibility conditions for availing home loan?

Different banks and financial institutions have their own eligibility conditions for availing home loans. Generally the following conditions are to be met to become eligible for home loan.

1)   Must be an Indian Resident  or NRI

2)   The applicant must be above the age of 21years at the time of commencement of the loan.

3)   The maximum age at the time of maturity of loan must be below 65 years.

4)   The applicant can be either salaried or self employed.

What are the loan repayment period options?

The repayment period normally is in the range of 5 years to 20 years.

Whether any securities are required to avail home loan?

In most of the cases, the property to be purchased, itself will be mortgaged as security to the lending institutions till the entire loan is repaid. But, in exceptional cases the institutions may  require  Life Insurance Policies, Fixed Deposit receipts, Share Certificates or savings certificates as additional securities for the loan amount.

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FAQ ON INHERITANCE OF PROPERTY

INHERITANCE OF PROPERTY

What are the categories of heirs among Christians for inheritance property ?

Indian Succession Act 1925 deals with the inheritance to intestate property among Christians. Sections 33 to 49 are relevant sections.

The heirs are of two types. (1) Relatives by blood (2) Relatives by marriage. The brother would fall in the first category, whereas wife will fall under the second category.

What is meant by consanguinity, kindred and lineal descendant?

Consanguinity means members of the same family, the relatives who are related by blood to the person, which may be lineal or lateral. Kindred means and includes all those who are related by blood through lawful wedlock.

Lineal descendants means the descendants in direct line comprising of sons, daughters, grandsons and granddaughters through them would be all lineal descendants subject to legitimacy.

How the property of  Intestate devolve?

The property of a person who dies without making a will (Intestate) devolves upon the spouse, that is husband or wife or those of kindred of the deceased in the order and according to the rules.

What is the position of widow in case of intestate property?

In case the deceased intestate has left widow and lineal descendants, one third of the property will go to the widow and remaining two thirds to the lineal descendants. In case of only widow with kindred but with no lineal descendants the widow will get 50% of the share in the property and the remaining 50% will go to the kindred. In case of absence any kindred or lineal descendants, the widow is entitled to full share in the property.

In case the deceased intestate has left no widow and no kindred, who will inherit the property?

Generally, the property will be inherited by widow, lineal descendants or those kindred to the deceased. In the absence of any of these heirs, the property will go to the government

What is the right of widower to the property of his wife dying intestate?

The right of the widower to the property of his wife who dies intestate is similar to that of a widow to the property of her husband dying intestate.

A Christian dying intestate has left no children but has left grandchildren who are the children of his deceased sons. Please advice how the property is devolved?

All the grand children share the property of their grandfather equally. We shall examine an example Mr. Stephen had two sons, Robert & Noble. Mr. Robert has one son & Mr. Noble has two sons. Both Robert & Noble died before their father Stephen. Mr. Stephen died intestate, leaving behind three grandsons. In this case each grand children will get equal share.

A Christian dies intestate leaving lineal descendents, but all of them are not of same degree of relationship. What is the procedure for devolution of property?

To make the issue very clear we shall look into an example. Mr. Stephen has two sons, Robert & Noble.Robert dies before his father leaving behind two sons. Mr. Stephen dies leaving behind his one son Mr. Noble and two grandsons (children of Mr. Robert) Mr. Noble the only surviving son of Mr. Stephen will get 50% of the property and remaining 50% will shared equally between two grandsons.

Who is a Minor?

Minor is a person who has not completed the age of eighteen years. So a minor attains majority on completion of eighteen years of age and not on reaching the eighteenth year of age.

Previously, the minors for whom guardians were appointed by the court, the prescribed age for attaining majority was after the completion of twenty one years of age. This has been amended and all minors attain majority on completion of eighteen years of age.

What is the position of the mother, if the father appoints a guardian to minor person, property, by will?

Father may appoint a guardian by Will to the person and property of his minor child. However such appointment of a guardian by Will does not have any effect if the father dies leaving behind his wife (mother of the minor child) who is the natural guardian of the minor child. The mother, (natural guardian) will succeed as guardian and not the person appointed by Will of the father. She may appoint a different guardian by her Will; who will succeed as guardian, on the death of the mother. In case, she does not appoint any guardian, by Will, the guardian appointed by the father by Will, will succeed as guardian of minor on the death of the mother. The guardian will act only until the minor completes eighteen years of age.

Can a guardian be appointed to the minor’s undivided interest in joint family property?

The Kartha is head of the Hindu joint family who is empowered to manage the property. In such cases no guardian shall be appointed. The Kartha takes care of the person and the property of the minor who is the co-parcener. However the competent court may appoint a guardian for undivided share of the minor in the joint family property also.

Who is the natural guardian of an adopted son?

The adoptive father, and after the adoptive father, the adoptive mother would be the natural guardians of an adopted minor son. The original parents of the son given in adoption will not be natural guardians.

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FAQ ON PART PERFORMANCE

PART PERFORMANCE

What is part performance?

Sale of an immovable property is an act of contract between parties. Each party to the contract has definite duties to perform; the vendor has to establish his title to the property, handover the title deeds and vacant possession of the property at the time of registration. The purchaser has to pay the consideration as agreed. Attend the registration office and help in completion of registration formalities. The vacant possession of the property is handed over to the purchaser at the time of registration. But in certain cases, the vendor hands over the vacant possession of the property to the purchaser pending registration of sale deed. This is called part performance.

Whether part performance is recognized and what are the rights of the purchaser?

Section 53 A of Transfer of Property Act recognizes part performance. The purchaser who gets possession of the property under terms of contracts gets equitable rights. The seller who puts the purchaser in possession or anybody claiming under are debarred from enforcing their claim against the purchaser or anybody claiming under purchaser. The seller cannot enforce eviction against the purchaser, once he has put him in possession of the property. The purchaser can continue and enjoy the possession of the property even though the sale deed is not executed and registered. Section 29 of Registration Act, recognizes the part performance.

What are the requirements of part performance?

Section 53 A of Transfer of Property Act stipulates certain conditions ;

1. It must be a contract for transfer of immovable property for consideration.

2. It must be in writing.

3. It must have been signed by the seller or his authorized agents.

4. The terms of contract shall be clear, should be ascertainable with reasonable care with certainty, the act of part performance should also be part of the contract.

5. The vendor in pursuance of the contract should have put the purchaser in possession of the property. The purchaser should have taken the possession and if already in possession shall continue to be in possession.

6. The purchaser has done some act like payment of consideration in pursuance of the contract or willing to perform his part of contract.

Whether the equitable right of the purchaser is enforceable against third party?

The equitable right is available only against the seller or anybody claiming under him. It is not enforceable against a party who has purchased the property for consideration and who has no knowledge of contract or act of part performance.

Whether the act of part performance apply to the gifts?

The applicability of part performance has two important ingredients, the existence of written  contract, and payment of consideration. The transferee should be a transferee for consideration.

In case of gifts there is neither sale contract nor consideration. The essence of the gift is transfer of property without consideration. As such the doctrine of part performance is applicable to gifts.

When the doctrine of part performance is not available ?

When the person who desires to invoke the doctrine of part performance is not the signatory to the agreement or the consent party nor the recitals show that the agreement was entered into with the consent of such person, he cannot seek protection under the doctrine of part performance since there is no privity of contract between the parties.

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STAMPING AND EXECUTION

STAMPING AND EXECUTION

Whether a promissory note, which is not adequately stamped is admitted in evidence?

The Indian stamp act has spelt out what are the document which are admitted as evidence though insufficiently stamped.Section 35 the act deals with this situation.There are certain document if insufficiently stamped which are not admitted in evidence and another category of insufficiently stamped document which are admitted in evidence on payment of penalty. The following documents if not sufficiently stamped are not at all admitted in evidence, even on payment of penalty

1.   Promissory note.

2.   Bill of exchange.

3.  Document which required to be stamped with 10 pairs or less

Some states have amended this minimum stipulation of 10 paise; in Andhra Pradesh it is 20 paise and in Tamilnadu it is 25 paise. All other document through insufficiently stamped are admitted in evidence on payment of penalty.

Who is to decide the proper stamp duty on any instrument incase of any doubts ?

Stamp acts of various states and union Government provide the stamp duty payable on documents. In case of any doubt the concerned party may approach the collector or dist registrar and apply for the deciding correct stamp duty payable on the instrument; on payment of certain fees.

The collector or dist registrar may call for the abstract of the instrument and also evidence to prove that all the circumstance and fact are  correctly set forth in the instrument the collector there of will decide the correct stamp duty payable and on payment of duty or any shortfall, shall certify to that effect. Such person need not pay any penalty or fine. If the document does not attract any stamp duty he shall certify accordingly.

Can document be stamped after signed  by parties?

No, cannot be.All the document need to be stamped and cancelled at the time of execution. Execution means the process of affixing the signature on the document. Adhesive stamps such as revenue stamps should also be cancelled by the party's signature across the face  of the stamp evidencing that the stamp were cancelled at the time of execution. Document which are to be franked should not bear the date of execution and signature of the parties. The document are to be dated at the time of franking the and parties have to execute the document after they are franked.

If an instrument is under stamped by accident or ignorance of the parties can it be rectified. If so what is the procedure?

YES. There is provision to rectify the mistake. Section 41 of Indian stamp act, section 40 of Karnataka stamp act provide for such situation. The time limit is one year from the date of execution. But this relief is not applicable for promissory note, Bill of exchange; instrument attracting stamp duty of 15 parties of less, mortgage of crop. The concerned parties on his own may produce the document, may bring it, to the notice of the collector or dist registrar the fact that the instrument in under stamped and agrees to pay the amount of the shortfall. If the collector or dist registrar is satisfied that the instrument is under stamped by accident, mistake or urgent necessity he may permit the party to pay the correct stamp duty and shall certify to the that effect.

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