What is FEMA compliance in real estate transactions?

FEMA compliance in real estate transactions refers to adherence with the Foreign Exchange Management Act, 1999 requirements when any cross-border element is involved including NRI purchases, foreign investment in Indian real estate, sale proceeds remittance abroad, or loan repayments from foreign accounts. Non-compliance can result in penalties up to three times the amount involved.

Key FEMA Compliance Requirements

• Payment routing: All property purchase payments by NRIs must flow through NRE/NRO/FCNR accounts or inward remittances.
• Reporting obligations: Certain FDI in real estate or large transactions require reporting to RBI.
• Repatriation documentation: Form 15CB (CA certificate) and Form 15CA filing for any remittance abroad.
• TDS compliance: Buyers of NRI-owned property must deduct TDS (20–30%) on capital gains and deposit with government.

Common FEMA Violations in Real Estate

• Cash payment to NRI sellers.
• Remitting sale proceeds without proper CA certification.
• NRI purchasing agricultural or plantation land without RBI approval.
• Foreign national purchasing property without RBI permission.

FEMA compliance is a non-negotiable element of any real estate transaction involving NRIs or foreign exchange. Both buyers and sellers should ensure proper account routing, TDS compliance, and repatriation documentation — ideally with the guidance of a FEMA-specialised Chartered Accountant.