Guidelines and Advantages for NRIs to Buy Property in India
The real estate sector of India has been one of the most lucrative investment options for Non-Resident Indians (NRIs). With the country’s fast-growing economy combined with a diverse range of real estate assets, the investment options may include both residential and commercial sectors. The real estate market across India has shown a consistent increase in demand for housing in both urban and suburban areas.
Why NRIs are investing in Indian Real Estate
The real estate sector of India has benefitted a lot from the investments made by Non-Resident Indians (NRIs). The sale purchase process has played a significant role in the evolution of Indian real estate. India’s property sector is witnessing significant developments due to evolving global economic conditions, which have encouraged NRIs to grab the opportunity to invest in their homeland. Listed below are some of the key reasons driving the trend:
Attractive exchange rates
The depreciation of the Indian rupee has motivated NRIs to invest in the real estate market of India. Individuals earning in stronger currencies such as the US dollar, British pound, or euro are always scouting for investment opportunities due to the weaker rupee. NRIs can easily benefit from exchange rates and buy premium properties in India at comparatively lower costs.
Government Reforms Boosting Transparency
Transparency and accountability are crucial for the real estate sector. The introduction of the following reforms has significantly increased transparency in the industry:
- – Real Estate (Regulation and Development) Act (RERA)
- – Benami Transactions Act
- – Goods and Services Tax (GST)
Fraud has decreased with the introduction of these reforms and boosted the confidence of investors. The real estate sector works hard to deliver projects in a timely manner and provide a solid framework for dispute resolution.
Demand for Commercial Real Estate
There is a significant surge in the commercial real estate segment in India. All properties, including warehouses, office spaces, and retail outlets, are worth making investments in. This is also why NRIs consider them lucrative investment options capable of providing stable returns.
Rental Income Potential
Investing in Indian real estate is definitely a fantastic way to earn a passive income in the form of rent. Rental income is one of the most hassle-free income options. Presently in India, a growing population and increasing urbanization have made way for consistent demand for rental properties. NRIs can benefit from this surging demand by investing in residential or commercial properties, which in turn help them earn a steady stream of rental income.
Easy Investment Procedure
The Indian government has made the process effortless for NRIs, enabling them to invest through varied channels. The investment procedure is straightforward and hassle-free, which helps them invest anywhere across the nation.
Diversification of investment portfolio
NRIs can easily diversify their portfolio by investing in Indian real estate. Although many non-resident Indians prefer investing in stocks, mutual funds, and real estate abroad, the Indian market promises a better balance of risk and return. As per professionals, the real estate industry serves as a concrete and comparatively steady asset in a fast-growing economy.
Retirement Planning
NRI real estate in India can be a prime tool for retirement planning. NRIs can choose to invest in residential properties for varied purposes such as rental income and retirement homes. Rental income from properties will offer a steady income stream during retirement.
NRI Guide to Buying Property in India
Being an NRI/OCI, one must follow the guidelines given below prior to purchasing a property:
NRIs and OCIs are permitted to invest in both commercial and residential property anywhere in India. They just required giving an intimation or getting in touch with the Central Bank (RBI) for buying a property.
NRIs cannot buy agricultural land, plantations, or farmhouses in India
Investing in immovable property in India does not require special permission. You can easily sell or gift such a property to any resident in India. The government will accept buying the property in INR. The funds must be maintained in a non-resident account under the Foreign Exchange Management Act (FEMA) and the Reserve Bank of India (RBI) regulation.
NRIs can easily repatriate income received through the sale of immovable property after the deduction of Tax Deducted at Source (TDS) (i.e., between 20% and 30%). This threshold will depend on whether the capital gain is short-term or long-term.
An NRI/OCI can easily buy a property independently or jointly (with a resident Indian (RI) or an NRI/OCI).
If you own a property in India and later obtain NRI status, you can continue to maintain the property in your name.
It is permissible for someone else to do transactions on your behalf. However, under such conditions, one must execute a Power of Attorney (POA) in favor of that individual or entity who will conduct business/activities and do transactions in their absence.
It is possible for any property owned by NRI/OCI to give that out on rent. NRIs can send the rent received from the property after paying applicable taxes (TDS of up to 30%) in India.
A background check is mandatory prior to purchasing a property in India. You can reach out to existing customers to get a firsthand experience and get details about the property.
These are certain guidelines for purchasing a property in India. In case you wish to invest in a property in India, then N4 can help.
Eligibility Criteria for NRI Investment
NRIs must meet the following criteria prior to investing in Indian real estate:
Ownership of Property: NRIs can purchase residential and commercial properties, but not farms or agricultural land.
Required Documents: The following documents are crucial for an NRI to invest in Indian properties:
- A valid passport
- Proof of NRI status (work or residence permit)
- PAN card (Permanent Account Number)
- Proof of source of funds
Financing the Investment: Eligibility criteria for an NRI loan in India include:
- Minimum annual income (e.g., $26,000 for U.S. residents)
- Down payment (10-20% of property value)
- Requisite documents
FAQs
What are the RBI guidelines for NRI investment in real estate?
Although NRIs have permission to invest in residential and commercial properties in India, ownership of agricultural land or farmhouses is an exception. An NRI is not allowed to invest and claim ownership of agricultural land or a farmhouse in India.
How many properties can an NRI buy in India?
There is no restriction on the number of properties an NRI can purchase under the general permission route.
Can NRIs transfer their property in India to another NRI or resident Indian?
Yes, as per Indian FEMA regulations and other applicable laws, NRIs are permitted to transfer their property in India to another NRI or resident Indian. The process can be done either through executing a sale or gift or any other transfer deed, subject to prevailing regulations.
How much income tax is applicable on NRIs for buying property?
In the event that an NRI purchases immovable property in India from a resident, the government will deduct 1% TDS. The deduction is done when the purchase price of that property exceeds INR 50 lakh. When an NRI purchases a property, TDS and capital gain taxes are applicable. The TDS deduction amounts to 20% as LTCGT, or long-term capital gain tax, or 30% as STCGT, or short-term capital gain tax.
What are the recent purchase trends in the Indian real estate market that NRIs should be aware of?
Some of the recent trends include the following:
- Increased demand for luxury and premium properties
- Growth in the affordable housing segment
- Rising interest in commercial real estate
- Adoption of digital platforms for property transactions
Does NRI pay TDS on the property?
Yes, if an NRI decides to sell a property in India after two years, then the buyer may deduct around 20% as Long Term Capital Gains Tax (LTCGT); on the contrary, if the property is changing hands in less than two years, then 30% Short Term Capital Gains Tax is applicable.