An NRI's Guide for Property Buying in India

by Shruti Sharma - Jul 15, 2022

India is an attractive market in real estate investment for Indians and Non-Resident Indians (NRIs) alike. Also, considering the fact that the Indian diaspora is the largest in the world, there are many NRIs working overseas who have their families living in India. Due to these factors, many NRIs are willing to invest in Indian real estate. To meet such a demand, The Government of India has made property purchase rules investment friendly. However, before seeking property for purchase, you should read this article and be aware about the conditions:

Type of Property

NRIs can buy both residential and commercial property in India but not agricultural land, farm houses, or plantation properties. However, if an NRI is willing to purchase agricultural land in India, it requires permission from the Reserve Bank of India for doing so. Other than this, an NRI can buy as many properties in India as he/she wishes. However, if an NRI cannot visit India to purchase the property, an individual with valid power of attorney will have to do so in behalf of that NRI.

Taxes Applied

NRIs can own any number of properties in India as he/she wants to. According to Income Tax Act of India, 1961, there are certain tax deductions available to NRIs while investing in the properties market of India. They can claim tax deductions under Sections 24 and 80C of the Income Act just like any other Indian Citizen.

Also read, “Taxation on Mutual Funds for NRI”

Home Loans

In case an NRI does not have the required funds on hand to purchase property, he/she can take a home loan through an NRI Account. RBI permits purchase of property by NRIs but requires the transaction to be completed through Indian currency. Furthermore, an NRI is also required to pay 20% of the home loan amount through owned money while the rest can be paid through borrowed money (i.e. Loans). It will require the NRI to open an NRI Saving Account in any bank, that is authorized by RBI to provide such facilities.

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Mode of payment for purchase of property in India

To purchase permitted immovable properties in India, the NRI has to either pay through banking channel by remittance from abroad or the NRI can use balance in his NRE/NRO or FCNR account. Since the money for this purpose has to come only permitted channels including through banking channels, the payment cannot be tendered in the form of traveler's cheques or foreign currency in India. NRIs are even permitted to use a home loan in Indian rupees to fund the acquisition of a residential property. For the purpose of financing the property, the NRI employee's Indian employer, a housing finance firm, or a bank may grant a home loan. Regarding EMI payments for repaying the home loan obtained in Indian rupees in India, the same may be accomplished either through direct repatriation from overseas or using funds available to the NRI's credit in NRE/NRO/FCNR accounts. In addition to the sources mentioned above, the home loan may also be repaid using the rent collected from the property or funds deposited into the borrower's account from a relative's account.

Also read, “How Can a Non Resident Indian (NRI) Invest in a Mutual Fund in India?”

Ownership

Regarding ownership, if an Indian citizen owns a property and then becomes an NRI, he/she continues to own the property in his/her name, and this condition also applies to any agricultural land. Considering that an NRI continues to live outside India, he/she can provide the power of attorney to an Indian citizen for making any property related transaction in India despite not being physically present in India.

NRI purchasers must use particular caution, especially when purchasing residences that are still under construction. Do your research on the builder's track record and resist the urge to fall for empty promises and slick marketing tactics. The Real Estate Regulatory Authority (RERA), which guarantees prompt delivery and conformity to the terms set forth at the time of booking, should be consulted first. Lastly, don’t go overboard in property investments. This needs to be recognized that real estate is an asset class like any other, with advantages and disadvantages.

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