Permanent Residency Status – A step ahead to woo investments
Sanjay R. Buch (Partner, Crawford Bayley and Co.)
Rahul Agarwal (Associate)
In a move aimed at encouraging foreign investments in India and to promote ‘Make in India’ programme, the Union Cabinet under the Chairmanship of Prime Minister Shri Narendra Modi has approved the scheme for grant of Permanent Residency Status (“PRS”) to foreign investors[1]. The said move can also be considered as a major step towards boosting and improving the investor sentiment in India.
The PRS Scheme intends to incorporate suitable provisions in the Visa Manual to provide for the grant of PRS to foreign investors. Additionally, the grant of PRS to foreign investors under the said scheme will be subject to relevant conditions as specified in the FDI Policy notified by the Government from time to time.
The PRS will be granted for a period of 10 years initially with multiple entry facility, which can be renewed for another 10 years if the PRS holder has not come to adverse notice. PRS will serve as a multiple entry visa without any stay stipulation and PRS holders will be exempted from the registration requirements. The scheme will be applicable only to foreign investors fulfilling the prescribed eligibility conditions. In order to avail this scheme, the foreign investor will have to invest in India a minimum of Rs. 10 crores to be brought within 18 months or Rs.25 crores to be brought within 36 months as inward remittance. Further, the foreign investment should result in generating employment to at least 20 resident Indians every financial year.
Under this new PRS Scheme, PRS holders will be allowed to purchase one residential property for dwelling purpose. The spouse/ dependents of the PRS holder will be allowed to take up employment in private sector (in relaxation to salary stipulations for Employment Visa) and undertake studies in India.
The Erstwhile provision of Foreign Exchange Management Act, 1999 allows a person resident outside India to hold, own, transfer or invest in Indian currency, security or any immovable property situated in India if such currency, security or property was acquired, held or owned by such person when he was resident in India or inherited from a person who was resident in India but the same was not allowed for foreign residents resulting which foreign residents were not able to invest in the immovable properties and securities. But now with the introduction of PRS, India is aspiring to compete with the likes of Singapore, Hong Kong and various European Union member states for foreign residents/entrepreneurs by offering permanent residency in return for investment which will allow them to invest in the India and give them additional rights as a resident of India which shall be subject to certain conditions as may be prescribed by the Government from time to time.
The concept of residency in return for investment is quiet famous amongst the European Union member states i.e. Hungary, Malta, Greece, Portugal etc. who are giving residency by investment in various programmes or golden visa schemes for third country nationals. One of the most popular such program is Hungarian Residency Bonds Program[2] which is considered as the fastest and cheapest residency by investment solution in the European Union. The applicant has to buy the residency bonds from an official agent for the face value of EUR 300,000. After five years the Hungarian government pays the whole amount back. The entire process takes only eight working days, and the applicant receives his/her temporary residence permit at once. It takes only six more months, and the permanent residence permit can be obtained. The Interesting thing is that under the Hungarian Law of Immigration, the residents do not have to stay the minimum 183 days in Hungary, but have to maintain an official address in the country. This program was launched one year ago, and already more than 1100 bonds have been sold. There are no additional costs for the family members of the applicant.
Similar to India’s PRS Scheme, Portugal in October 2012 has launched Portuguese Golden Visa program[3], since then the residency scheme generated almost 1 billion euros for the budget. The most attractive investment option for the Golden Visa is purchasing a property with a minimum value of EUR 500,000. The other possibilities are investing at least EUR 1 million or creating minimum ten permanent jobs.
In view of the above press release on the PRS Scheme, the intent of the NDA government is very clear to create an investment friendly ecosystem with core emphasis on more and more employment generation for resident Indians. As the said PRS Scheme will allow the foreign residents to invest and acquire immovable properties in India, the provisions of Foreign Exchange Management Act, 1999 need to be amended with a detailed procedure on the qualifications and terms and conditions under which such permanent residency status can be granted to a foreign resident. One will have to wait for the fine print of conditions that may be prescribed very soon.