Can NRIs Buy Property in India​? A Comprehensive Guide

India has a vast real estate market and among the huge population of those who invest in different types of property in the country are Non-Resident Indians (NRIs). The main factors driving many NRIs to buy property in India are the potential for high returns and the sentimental value of owning something in their home country.

Can NRIs buy property in India? Yes; they are allowed to purchase residential and commercial properties, but the law prevents them from investing in agricultural land, plantations or farmhouses unless it is inherited from a loved one.

Owning a property in India is a complex process; one must follow several legal, financial, and tax regulations. Any missteps can lead to penalties, disputes or loss of investment. The Foreign Exchange Management Act (FEMA) outlines all the rules for an NRI to follow: tax obligations and property management requirements that ensure compliance, and peace of mind for the NRIs buying property in India. 

What are the Legal Guidelines for NRIs Purchasing Property in India?

Foreign Exchange Management Act (FEMA):

• FEMA governs property transactions done by NRIs. Under the act, NRIs can purchase properties like apartments, houses, and commercial spaces, without any approval.

• However, under FEMA regulations, owning agricultural or plantation lands, or farmhouses is not allowed unless they have inherited.

Types of properties NRIs can buy:

• Residential Property: Single or multiple properties.
• Commercial Property: Offices, retail spaces, or warehouses.
• Inherited Properties: Any type, including agricultural land, as long as it was inherited.

Regulations to Note:

• All transactions must be conducted in Indian Rupees, through a non-resident bank account. It can be an NRE (Non-Resident External), NRO (Non-Resident Ordinary), or an FCNR (Foreign Currency Non-Resident) account.
• Title verifications and due diligence have to be conducted, to avoid fraud.

Financing Options for NRIs

Availability of Home Loans for NRIs from Indian Banks:

For NRIs buying property in India, there are several financial institutions and banks with loans tailored to NRIs. These loans can be used for:

• Buying new or resale properties
• Constructing a home on owned land
• Renovate or improve an existing property.

Key features of NRI home loans include:

• Loans are issued in Indian Rupees and are to be repaid in INR as well.
• EMI payments are to be made through NRE, NRO or FCNR accounts.
• Loan amounts depend on income, property value and repayment capacity.

If you are considering buying property in India as an NRI, here are some banks offering NRI home loans:

• SBI NRI Home Loan:

• Competitive interest rates and repayment tenures for up to 30 years.

• HDFC Ltd:

• Offers specialised products with flexible documentation requirements.

• ICICI Bank:

• Provides loans for both residents and NRIs with transparent terms.

Eligibility:

So, how can a NRI buy property in India? Here are some criteria to fulfil:

• Age: The minimum age is 21 years, and the maximum age at loan maturity is usually 60 years old.
• Income: Proof of a stable and regular income, which is verified through employment in a foreign country.
• Work Experience: At least one year of overseas work experience.
• Country of Residence: Some banks have restrictions depending on the applicant’s country of residence.

Documents Required for NRIs to Buy Property in India:

• Personal Documents:

• Passport and valid visa or work permit.
• Overseas and Indian residential address proof.

• Employment and Income Proof:

• Employment contract
• Salary slips for the last three months
• Bank statements for the past six months that show salary credits.

• Property Documents:

• Sale Agreements
• Approved building plans

• Banking Information:

• Statements of NRE, NRO or FCNR accounts.  

Comparison of Interest Rates and Repayment Terms:

• Interest Rates:

• Fixed Rates: Remain constant throughout the tenure, typically 8 to 10%.
• Floating Rates: Tied to the bank’s Marginal Cost of Funds-Based Lending Rate, and often change with the market conditions.

Repayment Terms:

• Tenure: Generally 5 to 20 years; banks may go up to 30 years in some cases.
• Prepayment Policies: Always check for prepayment charges; if the interest rate is floating, some banks will waive the fees.
• Mode of repayment: EMIs are debited from the NRE or NRO accounts.

How NRIs can Repatriate Funds from Property Transactions in India

Guidelines for Repatriating Rental Income and Sale Proceeds:

• Rental income and sale proceeds should always be sent to an NRO account.
• This repatriation is capped at $1 million (approximately INR 6.5 crores) per financial year, per account.

However, there are some unbreakable rules the NRI has to pay for the repayment to be accepted:

• The property sold or rented out should have been originally purchased in compliance with FEMA.
• All applicable taxes must be cleared before the funds are repatriated.

RBI Restrictions and Tax Implications:

The RBI has some strict regulations to be followed by NRIs who want to buy property in India:

• No approval is needed for repatriation within the $1 million limit, provided the funds were acquired legally.
• Any fund repayment beyond this limit requires approval from the RBI.

Tax Implications:

• Rental income is subject to Tax Deducted at Source (TDS) at 30%.
• The sale of property attracts capital gains tax:

• Short Term Capital Gains (STCG) are taxed as per the applicable income slab.
• Long Term Capital Gains (LTCG) are taxed at 20% with indexation benefits.

• The use of the Double Taxation Avoidance Agreement (DTAA) can help mitigate any tax liabilities.

Why is Power of Attorney Important for NRIs in Property Deals?

Role and Importance of PoA:

The Power of Attorney plays an important role in helping an NRI buy property in India. It allows the NRI owner to appoint someone to act on their behalf in property-related transactions. A PoA gives the representative permission to sign documents, execute agreements and handle registrations, especially as the NRI cannot be physically present in India.

Types of PoA:

• General Power of Attorney: Grants broad authority for multiple actions.
• Specific PoA: This limits the representative’s authority to specific tasks: selling property, or managing rental agreements.

Legal Requirements and Best Practices for Appointing a PoA:

• The Power of Attorney document should be executed in the NRI’s country of residence, and notarised and attested by the Indian Embassy.
• It should be stamped and registered with the Sub-Registrar in India.
• Some more best practices include:

• Limiting the PoA’s scope to necessary actions.
• Specifying time limits for the authority.
• Regularly monitoring activities conducted under the Power of Attorney.

Due Diligence in Property Purchase

Steps to Verify Property Titles and Ownership History:

• Title Verification: This helps make sure that the property has a clear title, making it eligible for sale.
• Ownership History: The history of the property’s ownership should be traced back at least 30 years, to help rule out any pending claims.
• Government Approvals: Check for approvals for land use, construction, and utilities.

Checking for Existing Difficulties or Legal Disputes:

Before buying property in India as an NRI, one should check for any pending disputes in the following ways:

• Search the Sub-Registrar’s office to make sure that there are no liens or unpaid loans on the property.
• Review court orders related to the property to confirm that there are no pending legal disputes or claims on the property.

Role of Legal Professionals in Ensuring Secure Transactions:

NRIs buying property in India can take legal help in case of confusion:

• Lawyers will verify the property documents, encumbrance certificates and legal compliance.
• They prepare and assess agreements, ensuring that the terms are fair and protect the NRI buyer’s interests.

Property Management for NRIs

Options for Managing Property from Abroad:

• Appointing a trusted family member or friend.
• Or, the NRI investor could also employ professional property management services.

Hiring Property Management Services: Things to Consider.

If you are seeking to hire a professional management service, there are some benefits to it:

• There will be regular maintenance and tenant handling.
• The rent collection and accounting will be done on time.
• All disputes will be resolved promptly by professionals.

However, remember to consider the following:

• Review service contracts carefully to understand all terms and hidden costs.
• Verify the credibility and track record of the service provider.

How to Ensure Regular Maintenance and Tenant Management:

• Technology: With IoT devices or property management apps, an NRI can regularly and remotely monitor if their property is being managed efficiently.
• Periodic Visits: Make sure the property is visited regularly by trusted representatives or managers.
• Lease agreements: Enforce clear lease agreements with tenants to protect rights and manage expectations.

How Do Real Estate Regulations Impact NRI Property Investments?

Understanding the Real Estate Regulation and Development Act, 2016:

The RERA was introduced to regulate the real estate sector and protect the interests of all buyers: residents and Non-Residents. The RERA’s key objectives include:

• Promote transparency in property transactions.
• Ensure timely delivery of projects.
• Regulate developers and real estate agents.

RERA affects the way NRIs buy property in India in the following ways:

• Transparency:

• Developers must register their projects under RERA.
• NRIs can vet all project details: approvals, timelines and specifications on RERA portals, or their desired property’s page.

• Accountability:

• Builders are required to deposit 70% of the project funds into an escrow account. This helps prevent any misuse of the funds.
• In case of any delays in project delivery, the developers should compensate the buyer.

• Dispute Resolution:

• RERA provides a structured grievance redressal mechanism, through Real Estate Appellate Tribunals.

Ensuring Compliance with RERA Provisions:

• Verify the developer’s RERA registration before investing. For example, you will find that all properties by L&T Realty have the required RERA registrations.
• Check if the project timelines, quality standards and terms of sale comply with RERA.
• Review the RERA-approved agreement of sale, and make sure you understand all the clauses.

What are the Smartest Investment Strategies for NRIs in India?

Long-Term vs. Short-Investment Perspective:

• Long-Term Investments:

• Ideal for wealth creation and stability.
• Suitable for rental income and value appreciation over time.  
• Popular options include residential properties in urban centres, such as L&T Realty Crescent Bay, Parel, or commercial spaces in IT hubs.

• Short Term Investments:

• Focused on quick returns through resale or flipping properties.
• Riskier due to regular changes in the real estate market.
• Best suited to NRIs who know the Indian real estate market trends well.

Diversifying Property Investments Across Different Regions and Property Types:

• While buying property in India as an NRI, consider investing in Tier-1 cities, such as Mumbai, Bengaluru or Delhi for premium returns. Tier 2 or 3 cities such as Indore, Jaipur and Coimbatore are ideal for affordable properties with growth potential.

• Diversify across property types:

• Residential: Apartments, villas, etc.
• Commercial: Offices, retail spaces.
• Plots: These have future development potential.

Assessing Market Trends and Making Informed Investment Decisions:

• Market Analysis: Research property demand, upcoming infrastructure projects and ROI potential.
• Policy Changes: Monitor government initiatives: Smart Cities, and Affordable Housing policies present profitable opportunities.
• Professional Advice: Consult financial advisors or real estate experts for data-driven investment decisions.

Why do NRIs Buying Property in India Seek Legal Assistance?

Engaging Qualified Legal Professionals for Property Transactions:

• Lawyers ensure that property transactions comply with Indian laws.
• They also help in identifying risks such as disputed ownerships, illegal constructions and unpaid taxes:

Understanding the Role of Legal Counsel in Drafting and Reviewing Contracts:

• Lawyers draft and assess the sale agreements, lease deeds and PoA documents.
• They ensure that the contracts include conditions that will safeguard the NRI’s investment: penalty clauses for delays or fraudulent transactions.

Ensuring Compliance with All Legal Requirements to Avoid Disputes:

• Legal professionals help verify land titles, encumbrance certificates and regulatory approvals.
• They also assist in obtaining the required clearances, such as RERA certifications or municipal approvals.
• Their guidance minimizes the risks of litigation or penalties in the future.

Latest Trends in the Indian Real Estate Market for NRIs

Emerging Trends in the Indian Real Estate Market for NRIs:

• Rise of Smart Homes:

• The demand for technologically advanced homes with IoT-enabled features is growing.
• NRIs are also keen on properties that offer convenience and luxury.

• Increased focus on Sustainable Housing:

• Green buildings and eco-friendly developments are gaining more attention.
• Properties with energy-efficient designs and amenities have a higher resale value.

• Commercial Real Estate Boom:

• More people are investing in co-working spaces and IT hubs, as they help in getting higher rental yields.
• Cities like Bengaluru, Hyderabad and Pune are the popular places for commercial properties.

• Rise of Fractional Ownership:

• NRIs are leveraging fractional ownership to invest in commercial properties at a reduced cost.

Potential Changes in Policy, and Buying Property in India as an NRI:

• GST Reforms: Reduced GST rates on properties that are still under construction, will potentially enhance affordability.
• FDI Liberalisation: Policies that encourage foreign direct investment boost real estate investment opportunities.
• Affordable Housing Schemes: Increased incentives for affordable housing expand investment options for middle-income NRIs.

FAQs

1. Can NRIs buy agricultural land in India?

• No. An NRI can’t buy agricultural or plantation land, or farmhouses in India. The FEMA regulations state that they can only own these types of properties if they are inherited.

2. Is rental income from an Indian property taxable for NRIs?

• Yes. Rental income is subject to TDS at 30%. Any tax liabilities can be managed through DTAA benefits.

3. Can NRI buy property in india without an Aadhar Card?

• Yes. An NRI can buy properties in India without an Aadhar Card, as long as they can provide other identification documentation, such as their passport.

4. Do NRIs need a PAN Card to buy property in India?

• Yes. NRIs will need to provide their PAN card while purchasing a property in India, as it will help with the taxation and registration process.

Conclusion

When it comes to buying properties in India, NRIs have lots of opportunities. However, these chances come with a lot of legal and financial regulations. As an investor wondering ‘Can NRIs buy property in India?’ make sure you understand RERA and get professional, legal help. Explore different investment strategies to make sure that you get the most profitable and secure investments.

Stay updated on market trends, changes in policy and investment risks. Work with trusted advisors, banks and developers to make informed decisions. With proper planning and compliance, buying property as an NRI will help you get considerable financial and personal rewards!