From correspondents in India, 09:15 AM IST

'As an NRI, you can't do business in India by telephone and email, you need to set up a proper branch office if you are serious,' said Jayant 'Jay' Kumar in Leicester. He plans to invest in real estate. NRI real estate agents and estate developers have been flooded with requests from their local clients after the Indian government allowed foreign direct investment (FDI) in real estate Feb 24, 2005.

At first, Jay made some deals through his business contacts in India but the business has now grown in size and complexity, and he has to set up shop in India.

An NRI is allowed to establish a branch office or an office in India to carry out lawful business. So NRIs are allowed to set up offices for export/import of goods, offering professional or consultancy services, representing the parent company and working as a buyer/seller for it, promoting financial or technical collaboration between Indian and parent companies, carrying research work for the parent company, supplying IT and software services, offering technical support to goods or services supplied in India by the parent company, airline/shipping company or any other activity permitted by the Reserve Bank of India (RBI).

Establishing a branch or an office does not involve too much red tape that India is notorious for. Just fill in one simple form and get approval from the Chief General Manager, Exchange Control Department, Foreign Investment Division, RBI, Mumbai. All that is needed is to fill up one-page form - FNC 1 - and get it approved.

The form seeks basic details such as name and address, details of capital, brief description of activities, value of goods exported/imported from India, representation arrangements of any foreign company, details of the branch or liaison office and the usual declarations that the particulars are true, the activities will be restricted to the ones mentioned, any change of address will be notified and an agreement to abide by any terms and conditions imposed by RBI. Although one can do this task easily, it is always advisable to get the form filled in by a local accountant or lawyer who knows the right language and can also follow its progress.

The normal activities of a Liaison Office are spelt out in the RBI regulations. But for real estate sector it is interesting to note that the RBI allows foreign companies to set up a Project Office in India if the project is financed directly by foreign funds transferred to India or by a multilateral agency like the UN, World Bank or European Union. In this case, RBI's Regional Office under whose jurisdiction the project is located will approve the Project Office. Although this clause is mainly for the aid donor agencies, here is a clear incentive for the private sector to invest in India's real estate development. RBI allows these Project Offices to operate a bank account in foreign currencies under certain conditions. Basic guidelines are laid down for operating this foreign currency account.

Sometimes the Branch or Project Office has to issue or transfer any security, including foreign security in India. Just apply to RBI and the permission is granted subject to some terms and conditions. The Branch Office, Liaison Office or other such offices have to provide details of their business operations to the Department of Company Affairs. Unlike all other limited liability companies, they do not have to file a Balance Sheet and a Profit and Loss Account but deposit other documents including a certified copy of RBI permission, a statement of receipts and payments, a statement of assets an

d liabilities and a certificate from a Chartered Accountant that the company did not carry oN trading or manufacturing or invoicing of goods in India.

Any foreign company involved in trading, manufacturing or other commercial activity has to follow the full requirements of filing its Balance Sheet and Profit and Loss Account with documents of its RBI approval. Since the whole aim of all this activity is to make profits by the foreign company, these companies are allowed to send their profits overseas. The foreign company can send its profits or surplus through its bank by following the laid down procedure.

Basically, the foreign exchange regulations have been gradually relaxed in India to permit import/export and other business activities. Setting up a business unit in any country involves many steps and India is no different. If Jay Kumar follows the basic rules for doing business in India and has some patience, he will establish his Branch Office to reap the bonanza in real estate development. Of course, he will need the telephone and email but with a proper Branch Office, the sky is the limit.

(A media consultant to a UN Agency, Kul Bhushan previously worked abroad as a newspaper editor and has travelled to over 55 countries. He lives in New Delhi and can be contacted at: kulbhushan2038@gmail.com)

(Staff Writer, © IANS)