Probing Property Deals of Foreigners

by Nandkumar Kamat

IT is a very contrasting picture. There is a vast segment of local population of Goa which does not own any property. There are economically-active local people including OBCs and tribals who do not possess any title to the land. There are thousands of salary-earning members of middle class like me who can not even think of purchasing a small plot in the land of our ancestors.

But taking the full advantage of favourable foreign exchange rates, Goa’s liberal atmosphere and indifferent local administration, foreigners — mainly Europeans are buying property in Goa contrary to the Reserve bank of India (RBI) regulations. From FEMA angle, a person is a resident in India means a person residing in India for more than one hundred and eighty-two days during the course of the preceding financial year (April-March) and who has come to or stays in India either for taking up employment, carrying on business or vocation in India or for any other purpose, that would indicate his intention to stay in India for an uncertain period.

In other words, to be treated as ‘a person residing in India’, under the FEMA, a person has to satisfy not only the condition of the period of stay (being more than 182 days during the course of the preceding financial year) but has also to comply with the condition of the purpose/intention of stay. And who decides the ‘foreign origin’? Under the FEMA, residential status is determined by operation of law. The onus is on an individual to prove his/her residential status if questioned by any other authority. This is another vague provision which has been fully exploited by foreign buyers, their agents and solicitors. Now, can a foreign national of non-Indian origin resident outside India acquire any immovable property in India by way of purchase? The RBI says that Under Section 2 (ze) of the Foreign Exchange Management Act, (FEMA) 1999 ‘transfer’ includes among others, ‘purchase’. Therefore, a foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India by way of purchase. But there is a loophole. The property can be leased. As would be clear from certain concrete examples gathered from Internet forums, rules are bent or loopholes are found to accommodate the foreign clients.

There is a total policy failure on the part of the home department of Government of India and the state government. Goa is too small a state to be auctioned to the foreigners. After eliminating the land under forests, existing settlements, agro-horticulture, industrial estate — the land left to be offered as property would be just 30 thousand hectares. Within next 10 years the recolonization of the land of Goa by the foreigners could be a serious issue of violent social conflict. It is not denied that many foreigners are friends of Goa and India and they fall in love with this state. Many British pensioners plan to settle in Goa to lead a quiet life.

Everyone is welcome as tourists. But can Goa open the floodgate for Britain or Europe? Let us educate ourselves about the experience, expectations and modus operandi of some foreigners who buy property in Goa. The cyber identity of the persons from the Internet discussion forums would not be mentioned in this article. Here is the experience of a British buyer which speaks volumes about their modus operandi in Goa. “To get a residency visa you have to stay there for 182 days but, of course, the tourist visa only lasts 180. However, if you have a business there, you can get a two-year visa and once you’ve been there, the required 182 days you can apply for a residency visa. So there is a way round it, if a bit long winded. We found a good solicitor who helped us to to set up our company and a bank account and it all went very smoothly. The cost was #300 - which seems to be a standard fee as a few other people have told us that they paid the same.”

Another post says -“The Indian authorities tend to be more co-operative with foreigners than when it comes to local Indians or NRI’s.” Plentiful online tips are available - sample this -“The best way to go about buying in India is to establish a business in your country of residence then open an Indian subsidiary - that then allows you to purchase property, although my understanding is that the business must be tourism-related.” People are concerned about foreigners buying properties in Goa. Another post says - “Should foreigners be buying property in India, it will be very cheap to most of them especially those in the West. But if for instance many foreigners buy property in Goa then the prices will shoot up, what about the people who live and work there?

These people will earn less, and be priced out of the property market because they can’t compete with the foreigners who won’t live there but will rent/live there at certain times of the year. Not fair in my opinion, it has knock-on effects to the local population. But not many are interested in such concerns.

An experienced foreign buyer has three tips to offer — First, in order to buy and obtain the deeds to a property you must complete 182 days stay in India within the tax year of April to March. However, if the above is not possible in the short term you can enter into an agreement to purchase with the seller this enables you to basically lease the property until you are able to fulfill the above. For example arrange a 99 year lease which would mean you would obviously have the property for the rest of your life.

Secondly, another option is to form a company in India and purchase the property through the business. This is a very simple way to purchase although can be time consuming and costs approx. #250. If in the future you decide to obtain your residency i.e. the 182 days stay, you would then be able to transfer the deeds to your name. The above may seem daunting, however, many hundreds have already bought. Perhaps the Chief Secretary of Goa could find out about these ‘hundreds’ of dealings and investigate the number of the temporary ‘companies’ registered.

Already Goa’s image has been maligned by the drug-based trance parties and the booming narcotics market. Now it looks like that in blatant violation of the laws, backdoor foreign colonization of the land of Goa is being encouraged at the cost of long-term interests of the locals and the national security. What a progress in a state which just celebrated 60th anniversary of the Goa Revolution Day!