10 Things Every NRI Must Know Before Buying Property in India
NRI Real Estate Investment in India has received a huge fillip over the past decade, with more and more Non-Resident Indians looking to consolidate their roots or maximize return on investment in India. But NRI investments in real estate aren’t as straightforward and easy as you think. If you are considering buying a property where you can settle with your family, or are simply on the hunt for an investment that will yield you hefty returns, here are 10 key things every NRI must know if he has plans of buying a property in India.
1. Understand Who Qualifies as an NRI
As per Indian law NRI (Non-Resident Indian) is a citizen of India who holds an Indian passport and is temporarily staying out of India for the purpose of employment, carrying on business, or any vocation beyond 182 days in any financial year. Indian real estate is only open to NRIs and PIOs, who can invest in real estate in India under the rules and regulations of the Foreign Exchange Management Act (FEMA).
This is crucial because residential status will affect what property you can purchase, taxation, and loan requirements.
2. Know What Types of Property You Can Buy
According to FEMA, what NRIs can buy:
- Homes (apartments, villas, sites etc.)
- Commercial properties (shops, office spaces)
NRIs are also not allowed to buy agricultural land, plantation property or farmhouses in India unless such property is inherited or given as a gift. And this is a mistake most NRIs commit when searching for investment in India.
What Are the Best Property Investment Options for NRIs?
3. You Don’t Need RBI Approval
One of the best NRI Real Estate Investment Benefits in India is that you need not take special permission from the Reserve Bank of India (RBI) to buy the permitted properties. “The transaction must be in accordance with FEMA rules and should be through normal banking channels.
4. Use an NRE/NRO Account for Transactions
All payments for property purchased are to be made in Indian Rupees (INR) by way of the following:-
- Non-Resident External (NRE) Account
- Non-Resident Ordinary (NRO) Account
- Foreign currency remittance
Cash payments are not allowed. Legal channels provide legitimacy and transparency, and are also crucial if you ever want to repatriate funds.
5. Home Loans Are Available to NRIs
Yes, NRIs can avail home loans from Indian banks! Most major banks and housing finance companies offer home loans to NRIs under specific terms:
- Shorter tenure (usually up to 20 years)
- Documentation proving overseas employment/income
- Local co-applicant may be required
Repayment must be done through NRO/NRE accounts using inward remittance.
6. Tax Implications for NRIs
NRIs also have to pay taxes on the income from real estate situated in India just like residents. Here’s what you need to know:
- “Rental Income” is taxed under the head “Income from House Property”.
- Capital Gains Tax is applicable to selling the property (20% long-term gains, 30% short-term).
- TDS (Tax Deducted at Source) is deducted @ of 20%-30% on Sale proceeds, based on the holding period.
- India has entered into Double Taxation Avoidance Agreements (DTAA) with various countries to prevent dual taxation.
7. Repatriation of Funds
If you plan to sell the property later, repatriating the sale proceeds has rules:
- The property should have been acquired through NRE or foreign funds
- Repatriation of two properties is allowed at most.
- The amount repatriated shall not exceed USD 1,000,000 annually.
- Repatriation attracts tax and is governed by the RBI; don’t forget to keep records.
How Can NRIs Invest in Mutual Funds in India? A Guide with Expert Advisory
8. Check Developer Credibility
Due diligence is crucial, especially when purchasing a property that is still under construction. Always:
- Check the developer’s RERA registration
- Also, check if the builder has a history of delivering projects on time, especially when it comes to under-construction projects.
- Visit the site (or ask someone you trust)
9. Power of Attorney (PoA) is Important
If you can’t be physically present during the transaction, giving PoA to a trusted family member or friend in India is advisable. This person can sign documents, register the property, and handle legal formalities on your behalf.
Ensure the PoA is:
- Notarized
- Apostilled (if applicable)
- Registered in India
Guidelines and Advantages for NRIs to Buy Property in India
10. Register the Property Properly
When you close the deal, make sure the property is:
- Registered with the local sub-registrar
- Stamp duty and registration charges are also paid
- The mutation of the property is completed
This provides you with legal rights of ownership and saves your property from any future controversies or encroachments.
Watch the Tutorial before Investing in Real Estate
FAQs – NRI Investment in Real Estate of India
Q1. Can NRIs purchase property in India jointly with an Indian resident?
Yes, NRIs can co-own a property with Resident Indians, PIOs, or other NRIs. But the co-owner must also be someone who is allowed to purchase property in India under FEMA rules.
Q2. Can NRI sell property to a resident Indian?
Yes. An NRI can sell residential or commercial property to an Indian resident, another NRI, or a PIO.
Q3. Are there any regulations for NRIs to buy properties?
No, there are no limits on the number of properties of any kind an NRI is allowed to own in India.
Q4. Are NRIs taxed on Indian property rental income?
Yes. Rental income is also taxable in India, and TDS at 30% applies generally. If your residence country has a treaty, you can avail of DTAA benefits.
Q5: Can NRIs buy agricultural land in India?
No, NRIs are not allowed to buy agricultural land, plantation property, or farmhouses unless it’s inherited or received as a gift.
Q6: Do NRIs need Aadhaar to buy property in India?
No, Aadhaar is not mandatory for buying property. However, it may be needed for other services like utility connections or PAN card-based transactions.
Q7. Can an NRI grant Power of Attorney to some for property transactions?
Absolutely. In reality, it’s advised for the sake of conveniently managing legal and financial machinations on your behalf.