In order to ensure more liquidity for the real estate sector, RBI has allowed the registered housing finance companies to raise short-term funds from overseas markets.

After pumping in around Rs 2.80 lakh crore liquidity into the banking system, the Reserve Bank on Saturday announced a slew of measures to give a boost to the real estate sector, in addition to taking steps to arrest decline in forex reserves.

In order to ensure more liquidity for the real estate sector, RBI allowed the registered housing finance companies to raise short-term funds from overseas markets.

"It has been decided to allow, as a temporary measure, housing finance companies registered with the National Housing Bank to raise short-term foreign currency borrowing under the approval route", a release by RBI said.

The decision will also help the country shore up its declining forex reserves, which according to the latest data, has slipped to about USD 250 billion from a high of USD 314 billion in April-May.

In addition, the RBI also permitted Indian banks to offer better interest rates for foreign currency deposits by the non-residents.

Henceforth, the banks can offer rates up to 100 basis points over London Interbank Offered Rate (LIBOR) under Foreign Currency Non-Resident (Banks) scheme and 175 basis over LIBOR on Non-Resident (External) Rupee Accounts deposits.

These changes will encourage the banks to make the non-resident deposit schemes more attractive by raising interest rates.

Since October RBI has announced various measures, including cutting the mandatory deposits that banks keep with RBI by 350 basis points, unlocking nearly Rs 2.80 lakh crore bank funds.

Ashish Gupta informed that a Non resident Indian and Person of Indian origin can purchase, lend, transfer or resell the residential property in India, as well as take the rental income and their investments in the property out of the country following the foreign exchange regulations. This provision made it easy for NRIs to invest in India.

However, there are restrictions in obtaining property for a PIO who is a citizen of Pakistan, China or Bangladesh. In addition, the NRIs and PIO have no permission to buy agricultural land, plantation property and a farm house.

An NRI/PIO has the authorization to use his personal funds to purchase an immovable property. He can also opt for a housing loan from a bank. Own funds are money received in India through an inward payment from overseas out of income produced overseas, personal savings outside India, and funds held in non-resident external (NRE), non-resident ordinary (NRO), or a foreign currency - non-resident (FCNR) bank account.

Besides own funds, he can apply for a housing loan from a bank. The authorized banks have permission to proffer housing loans to NRIs and PIOs to purchase property in India. However, certain conditions apply here. The required amount of loan, margin money and the period of refund are proportional to the housing loans granted to residents in India.

The loan amount cannot be accredited to the NRE/FCNR account of the NRIs/PIOs. It should be secured enough through an evenhanded mortgage of the property which they want to acquire.

The bank may also have a hold on the other properties of the buyer in India if required. In addition, the NRI/PIO should pay the installments of the loan, interest and other charges through remittances from outside India by normal banking channels or out of funds in his NRE/FCNR/NRO account in India. They can also repay the loan and interest out of the rental income of the property bought. They do not need any approval from RBI to transfer the property to anybody be it a resident of India or another NRI/PIO. If the property is let out, the rental income can be accredited into the NRO/NRE account. On condition of sale, they can dispatch the sale proceeds of up to two properties outside India without seeking approval from RBI. Transfer of funds for third and subsequent properties needs an RBI approval.

The mode of acquisition determines the payment of the sales proceeds. An NRI can purchase a property out of rupee funds before leaving India or after leaving India on the condition that he pays from his saving bank account here in India.

The proceeds can be refurbished if the amount does not go over either the amount paid for buying the property in foreign exchange received from overseas, the amount paid from the FCNR account, or the foreign currency equivalent of the amount paid from the funds held in an NRE account.

The remittance depends on the holding period of the property on condition that the property is purchased from rupee funds held in India. In case the property is detained for more than 10 years, up to one million USD per calendar year can be sent back without taking any RBI approval.

If the property is traded after keeping in custody for less than 10 years, payments can be made if the sale proceeds were held for the balance period in an NRO account or other eligible investments. There is no lock-in period for remittance of sale proceeds of assets acquired through inheritance or settlement. In all the remaining cases, specific approval of the RBI is required.

At places a specific approval of the RBI is not required ,you need an appropriate certificate from a chartered accountant, certifying that you have paid all applicable taxes in case you wish to remit the sale proceeds of the property along with the rental income outside India through normal banking channels.

Strengthening private sector participation in urban affordable housing could help achieve the "housing for all by 2022" vision Central and several states governments in the past have undertaken steps to mitigate the urban housing deficit, largely in partnership with the private sector. These efforts have yielded notable results, which is evident from few case studies presented in the annexure of this report. While, the efforts governments (both central and state) have taken in past are commendable, they need to be accelerated to eliminate housing deficit in the country. With the current set of housing development policies in place and assuming an annual growth in investments by about five to six per cent in the housing sector (as witnessed since FY08), the required investments may fall short by about USD500 to 600 billion. This gap in funding would likely be restricted due to several structural issues in the sector such as high gestation period of housing projects, limited and expensive liquidity, spiralling land and construction cost, high fees and taxes, unfavourable development norms, and affordability vis-à-vis housing prices for EWS/LIG households. Mobilisation of such huge resources (funding, construction capacity, labour, technology, etc.) for mass scale affordable housing development by the central and state governments may be difficult, without participation from the private sector. The private sector, which is often better in term of managing construction risks and project delivery, should be encouraged by central and state governments, by addressing several structural issues (listed in next section).