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Can an NRI purchase a coffee estate in India?

 

I come across many queries about acquisition of purchase by Non Resident Indians (NRI) or Person of Indian Origin (PIO) or Overseas Citizenship of India (OCI). Most recently, I have been asked a specific question – Can an NRI buy a coffee plantation? Maybe NRIs have sufficiently invested in residential properties and now they are exploring other investment options such as this one.

 

Unfortunately the answer to the above question is NO.

The Foreign Exchange Management Act (FEMA) empowers Reserve Bank of India (RBI) to frame rules and regulations to prohibit, restrict or regulate the acquisition or transfer of immovable properties in India by persons’ resident outside India (such as NRI or PIO)

 

As per the circular of RBI (updated upto 19th December, 2014), an NRI/PIO can acquire by way of purchase any immovable property other than agricultural land/ plantation property/ farm house) in India.

 

The next follow up question is ‘whether an NRI can incorporate a private limited company in India and can that company buy coffee estate?’

 

Once you set up a company in India, it becomes a domestic company and so naturally, it should be able to buy a coffee estate, isn’t it?

 

The answer is NO. Any investment made by an NRI in the company amounts to Foreign Direct Investment (FDI). So one has to see whether FDI Policy allows the investment.

As per the latest FDI policy (updated April 2014), investment in certain sectors are prohibited including Real Estate Business or construction of farm house.

 

Similarly, investment in Coffee Plantation or Rubber Estate, etc are prohibited except Tea Plantation (with the prior approval from Government of India).

FDI in agricultural activities such as floriculture, horticulture, apiculture (beekeeping) cultivation of vegetables, mushrooms, animal husbandry, breeding of dogs, poultry breeding, pisciculture (fish farming), aquaculture, development of seeds and planting materials under controlled conditions is allowed.

 

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About CA Prasad Chartered Accountant

CA Prasad Chartered Accountant
CA Prasad is a practicing Chartered Accountant and partner in Bangalore -based CA Firm. For further information or query, please email it to [email protected]
  • Amandeep Singh

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