Aakruthi Properties

NRIs and Real Estate in India – Property Buying Guide

With the developmental booms anticipated in India, going forward, the land value and land returns make the Indian land a lucrative investment opportunity for Non-Residents in India. Investments go beyond numbers and for an NRI, an asset in the motherland for good value is a promising choice to invest into.

As an NRI, you may want to keep the following in mind before you invest –

Permissions –
As an NRI, you are issued general permissions from the RBI to purchase any number of lands that can be used for both residential or commercial purposes in India. To purchase farmhouses, agricultural lands, or/and plantation lands however, would require prior permission from the RBI.

Power of Attorney –
When an NRI is not present in person to purchase the property, the Power of Attorney as appointed by the buyer, a family member, and verified by the Consulate of the host country or the country where the NRI resides in, plays a key role in the registration process. The Registration Act requires both the buyer and the seller of the property to sign the documents and the same is required to be validated by the registrar of the location where the transaction takes place.

Ownership –
Under the Foreign Exchange Management Act (FEMA) and as per RBI guidelines, an NRI is eligible to purchase either residential or commercial property in India and can further finance the necessary home loan in Indian rupees. An NRI can partake in a joint ownership with an Indian citizen.

Loan –
NRIs can avail home loans to purchase real estate in India. Most banks and NBFCs (Non-Banking Financial Companies) offer loans without a budget restriction. However, interest rates may be higher although the specifics are found to vary from lender to lender.

Payment –
Since the payment for purchases on real estate in India have to be made in the rupee and cannot be paid via using the host country currencies; a non-resident account, such as an NRO/NRE account (Non-Resident Ordinary or Non-Resident External Account) or an FCNR account (Foreign Currency Non-Resident Account) as per the Foreign Exchange Management Act (FEMA) under the regulations of the RBI can be used to make the payments required.

Taxes and Charges –
Properties in India irrespective of how they may be used as they generate income, are taxed. Rental income is charged with 30% TDS (Tax deducted at source) and when resold, TDS of 20% for long-term capital gains is charged while the short-term capital gains tax is applied as per the NRI income tax slab rates. Needless to say, stamp duty fees, registration charges, and GST needs to be paid.

Frequently Asked Questions

01 Who is an NRI?
As per India’s Foreign Exchange Management Act (FEMA) 1999, an NRI or Non-Resident Indian is a citizen of India, or a foreign national of Indian-origin, living outside India for employment, business or any other vocation, which would indicate his intention to stay outside India for an indefinite period. An Indian would also be termed as an NRI if his stay in India less than 182 days during the previous financial year (April-March).
02Who is a Person of Indian Origin?
A PIO is an individual (not a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan) who has at any time held an Indian passport. Or, one whose either/both parent/s or grandparents were citizens of India, according to the Indian Constitution or the Citizenship Act, 1955.
03What is meant by a person resident in India?
As per India’s Foreign Exchange Management Act (FEMA) 1999, a person resident in India is a person residing in India for more than 182 days during the previous financial year (April-March) and who has come to, or stays in India either for employment, business or for any other vocation.
04Can a foreign national who is a person resident in India purchase immovable property in India?
Yes, a foreign national who is a person resident in India can purchase immovable property in India but only after obtaining the approvals and fulfilling the requirements.
05Can an NRI get a home loan?
06What are the tax benefits for NRIs buying property in India?
There are no tax benefits.

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