NRI Investment in Real Estate in India: Things to watch out for

Since India is a promising market for investors, Non-Resident Indians are taking keen interest in the property market in India. This is the reason why NRI investment in real estate in India reached $13.1 billion in 2021 and expected to grow by 12% in 2022 as per a report by 360 Realtors. 

With an array of NRI investment options in India, a common question is should NRI invest in real estate in India? 

Investing in immovable assets like property is one of the biggest achievements. The feeling of buying a property in India is extraordinary for NRIs irrespective of where they are living. 

NRIs who want to invest in commercial real estate in India or ask any question related to the same can schedule a call with the NRI investment expert right away.

Top reasons why should NRIs invest in real estate in India

Over the decades, the real estate market has proven to be an attractive investment opportunity with healthier relative returns. It has remained a favorite choice of both local and NRI property investors alike. 

Here are top reasons why NRIs should invest in real estate in India

NRI Investment in Real Estate in India: Things to watch out for
NRI Investment in Real Estate in India

Booming Indian market

Even after the economic hardship and severe challenges posed by the Covid-19 outbreak, currently the Indian market is resurgent. Looking at the positive consumer and market indication, the Indian economy will grow by leaps and bounds in the coming years. 

This will increase the demand and property price, and NRI investors can get higher returns on investment. Not only residential property, but new segments of investment i.e. fractional ownership in commercial real estate, co-working spaces, warehousing, etc. offer great opportunity to NRI investors. 

Better ROI than other instruments

Traditionally, Indians living and working abroad used to prefer investment tools like bank FDs, gold and equity market. Investment in such assets is subject to market volatility, and returns potential of fixed deposits and gold is low, ranging from 4 to 6% per annum.

Real estate, especially commercial real estate, is a lucrative investment, offering an average rental yield of 8-11% per annum. Moreover, the boom in tier II and tier III is encouraging NRI investors to invest in real estate in these cities. 

Portfolio diversification

NRIs who disproportionately invest in fixed return assets like FD and gold can invest in real estate in India to diversify their portfolio and income generation. It will help them reduce the volatility of their portfolio and seek advantage of different investment assets.  

Simplified tax regime

NRIs are eligible to get an indexation benefit for their properties situated in India. For example, an immovable property held in India for more than 24 months is classified as a long-term capital gain asset and obtains an indexation benefit with simplified taxation at 20%. Certain tax deductions are allowed under Sections 80C and 80TTA of the Income Tax Act of India. 

Properties where NRIs can invest

Many people doubt whether NRIs can buy or own a property in India. Well, NRIs can buy or own an immovable property in India in compliance with the FEMA (Foreign Exchange Management Act) regulations. NRIs and OCIs (Overseas Citizens of India)  are treated similarly when it comes to investment in real estate in India.  

The Reserve Bank of India allows NRIs to buy any commercial or residential property in India. NRIs are not required to seek any permission from the RBI. They are allowed to own as many commercial and residential properties in India as they can.

However, NRIs can’t buy agricultural land or plantation property in India. NRIs who are interested in buying farmhouse or plantation property in India need to seek certain permission from the RBI. The RBI grants permission on a case-by-case basis. 

How to invest in real estate in India

To buy a property in India, an NRI investor needs to make the payment in INR (Indian Rupee) through a local bank. Therefore, to route the transactions through a bank in India, you must have an NRI account in any authorized bank in India for inward remittances. NRIs can submit post-dated cheques or opt for the ECS from an NRE, NRO or FCNR account.   

As a part of the application, get all your documents verified. You must get a certificate from the seller, stating that there is absolutely no lien attached to the said property. Also, make sure that no other dues or bills are pending with any authority. 

If the NRI buyer can’t visit India to execute the transaction, they can give Power of Attorney to someone to complete the documentation for the purchase of the property on their behalf. 

Joint ownership for NRI investment in real estate in India

NRI can jointly purchase a property with any other NRI. However, an NRI or resident Indian who is not allowed to invest in the property in India can’t become the joint holder in any such property, irrespective of the contribution of the second buyer towards the purchase.

Important points about NRI investment in real estate in India

Below are some important points that NRIs should keep in mind when investing real estate in India:

  • NRIs can buy any commercial or residential property without seeking permission from the Reserve Bank of India. 
  • They are not allowed to purchase any agricultural land or plantation in India. RBI permission is required in case there is a certain reason for buying the agricultural land.
  • NRIs can buy any number of properties in India and there is no cap on home loans for NRIs. 
  • Non-residents can give Power of Attorney to someone in India to conduct the transaction on their behalf. The person will sign documents on behalf of the NRI. 
  • Similar to resident Indian buyers, NRIs are also liable to pay transaction charges and taxes like registration fee, stamp duty, yearly property taxes, etc. 
  • Income earned from a property in India by an NRI will be repatriated in compliance with the FEMA rules.   
  • TDS will be applicable on proceeds earned through sale of immovable property by NRI based on the short or long-term capital gain. 

NRI investment in real estate in India is an ideal option. Over the years, NRIs are increasingly investing in commercial and residential real estate in India. As per Neo-Realty survey by MYRE Capital, 53% of NRI investors are millennials. As compared to last year’s investment of $13.1 billion, NRI investment in Indian real estate is projected to grow by 12% in 2022 as per a report by 360 Realtors.

However, before making investment decisions, you must consider each important aspect from asset, investment amount to ROI and taxation. 

Five reasons why NRIs should invest in Indian real estate now

We at SBNRI are here to help you out with everything related to residential/ commercial property transactions in India and other financial and legal services as required by NRIs. We help NRIs find a commercial and residential property in India that will offer them outperforming returns.

You can download SBNRI App to connect with our experts and get end-to-end assistance related to an NRI investment in India.

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