Whether it is FDs, mutual funds, insurance or real estate, NRIs have been aggressively investing in India for the last few years. However, many people still ask ‘can an NRI buy or own property in India? As per the Foreign Exchange Management Act (FEMA), NRIs are allowed to purchase certain types of properties in India.
NRIs who want to buy a property in India should be aware of certain legal provisions related to the purchase or ownership of immovable property in India under the Foreign Exchange Management Act (FEMA). There is no restriction on the number of properties NRIs can own in India. NRIs and Persons of Indian Origin (PIOs) are treated at par for the purpose of investment in real estate.
What type of property can an NRI buy in India?
Indian citizens residing outside the country can invest in real estate, provided the property they want to purchase is not agricultural land, plantation property or a farmhouse. An NRI doesn’t need to seek any specific permission from the RBI to invest in property in India, nor is he required to send any communication or intimation about the same to the RBI. The income tax laws also allow an NRI to own as many residential commercial properties as he wants. However, if an NRI wants to purchase a farmhouse or plantation, he needs to seek specific permission from the Reserve Bank of India and the RBI will consider this on a case-to-case basis.
Procedure for NRI to buy property in India
Documents required for NRI to buy property in India
Here is the checklist of documents required for NRI to buy property in India:
- Passport or OCI card: As an NRI you will need to share your passport. If you hold a foreign passport, you need to show a Person of Indian Origin (PIOs) card or Overseas Citizen of India (OCI) card to buy property in India.
- PAN card: A PAN card is mandatory to buy property in India.
- Power of attorney: If you are not in India to complete all the formalities required for the purchase of property, you need to appoint a power of attorney. A special power of attorney which is registered and notarized, not a general power of attorney, is required to execute a property transaction.
Apart from your passport and PAN card, you will need to submit your current address proof like any utility bills and passport size photographs for the sale deed registration.
How can NRIs fund their purchase?
You can fund the purchase of your property in India through inward remittances or using funds in your NRI account. This means you should have an NRI account in one of the authorized Indian banks. You can also submit post-dated cheques or opt for Electronic Clearance Service (ECS) from your NRE, NRO or FCNR accounts.
You can also get an NRI home loan. Many banks and Non-Banking Financial Companies (NBFCs) offer a home loan to NRI customers. In this case, you need to make a downpayment of at least 20% of the market value of the property from your own sources. The bank will offer up to 80% of the property’s value.
Documents required to get NRI home loan
- Photocopy of Indian passport and visa
- PIO card (if you hold a foreign passport)
- OCI card (if your parents are/ were citizens of India)
- Work/ employment permit, appointment letter in company’s letterhead
- Latest salary slips/ certificate for the last 6 months
- Latest Income Tax Returns
- Bank statement of the NRE/ NRO accounts for the last 1 year
- Bureau report of the country of your residence
- Power of attorney (if required)
Before approaching a bank for funds, you must get all your documents verified by a competent lawyer or Chartered Accountant. Also, get a certificate from the seller stating that there is no lien attached to the property you are going to purchase. If the property is jointly held or inherited by the seller, make sure the title deed is cleared. Also make sure that no other dues with any authorities like electricity/ water bill or house tax, etc., are to be cleared.
Tax implications for NRIs buying property in India
- NRI borrowers will be liable to pay the required taxes including registration fee, stamp duty, post-purchase annual property taxes and even GST in case of an under construction property.
- Rental income from an NRI property in India will be subject to a TDS (Tax Deducted at Source) 30%, the remaining amount can be repatriated under FEMA rules.
- If an NRI sells an immovable property, the proceeds earned from the sale of the property can be repatriated after the deduction of between 20% and 30% TDS, depending on the capital gain (short-term or long-term capital gain).
If you want to sell or purchase a property in India, you should have sound knowledge of NRI property transactions and tax laws. We at SBNRI are here to help you out with everything related to property transactions in India and other financial and legal services required by NRIs.
You can download SBNRI App to connect with our experts and get end-to-end assistance related to an NRI home loan.
Yes, NRIs can own or buy property in India, provided the property is not a farmhouse, plantation property or agricultural land.
Yes, like resident Indians, NRIs are also required to pay property tax in India.
An NRI can purchase a property in India by submitting required documents such as a passport, PAN card and ITRs. If the NRI is not in India, he/she can appoint a power of attorney for executing purchase transactions. You can fund the purchase of your property in India through inward remittances or using funds in your NRI account.
Income in the form of salary received in India or income for services rendered in India is subject to income tax. Income from other sources like interest received in the NRO account is fully taxable. Moreover, capital assets of Indian origin like house property, shares and securities, gold, etc., shall be taxable in India.