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How to buy property in India as an NRI 

The real estate market in India has shown steady growth over the past years. This presents a lucrative investment opportunity for non-resident Indians (NRIs).

As an NRI, it may be considered a wise financial option to invest in your home country. 

This guide covers different aspects of NRI real estate investment, from getting a home loan to the tax implications for non-resident Indians. 

5 benefits of purchasing property in India

In addition to the emotional connection to your home country, there are many reasons why buying property in India as an NRI might be a good investment.

  1. Appreciation potential
    Rental properties may go up in value, increasing your net worth, the investment's resale value, and rental yields.
  2. Tax-saving opportunities
    NRIs can take advantage of various tax benefits, such as home loan interest deductions and capital gains exemptions, subject to certain conditions being met.
  3. Diversified investment portfolio
    Building a diversified portfolio and spreading investments across different types of asset classes can minimise risk.
  4. Process is getting easier
    NRIs can buy multiple residential and commercial properties without needing approval from the Reserve Bank of India (RBI).
  5. High rental yields
    A primary benefit to owning property in India is a stable source of rental income.
Some reasons for the increased NRI investment in Indian properties are a helpful government structure, relaxed regulatory policies, and a drop in the rupee's value.

Types of property you can buy

As per Foreign Exchange Management Act (FEMA) guidelines, there are no limitations to the number of properties that NRIs can buy in India.

These include: 

  • Residential properties
    Flats, villas, and independent houses for self-use or rental income; any number of housing units in India
  • Commercial properties
    Shops, offices, and warehouses that you can use for business purposes
  • Non-agricultural land or residential plot
    For constructing a house

Restrictions

NRIs are not allowed to buy agricultural land, farmhouses, or plantation properties. They can only acquire these properties if they inherit from a resident in India or meet RBI criteria.

Ownership of the property

As an Indian resident, if you own property in India, you can retain ownership even after acquiring NRI status.

If you're an NRI living outside India and want to purchase a property in India, you can provide a power of attorney (POA) to any Indian citizen. This could be a resident close relative. Since you're not physically present in India to purchase a property, your POA can complete the property purchase. 

Getting a home loan for a property purchase

For both commercial and residential properties, you can apply for a home loan with any lender in India authorised by the RBI to extend an NRI home loan. The RBI guidelines state that NRIs must complete the real estate purchase transaction in Indian rupees only.

As an NRI buying property in India, you'll also need a down payment and an NRI bank account.

Learn more: How to open an NRI account online

Complying with the legal obligations

When buying a property in India, it's important to be thorough with the paperwork. 

After finalising the property that you want to buy, you'll need to sign the sale agreement to complete the transaction. This legal contract contains the main terms and conditions, including the payment schedule and date of possession.

Property registration is another important legal obligation when buying a property in India. Both you and the seller must sign the required documents at the sub-registrar's office.

Tax implications

NRIs buying property in India must be aware of the tax implications. Taxes that must be paid include: 

  • Stamp Duty – May vary from one state to another, but usually ranges from 5% to 10% of the agreement value
  • Registration charges – Statutory fee could be between 1 to 4% of the property’s value
  • Service charge – 18% GST

If you're planning to rent out your property, then you must also pay income tax on the rent received, according to the income tax slab you fall under. An NRI can claim a 30% standard deduction on rental income and deduction of municipal taxes paid. You must also declare the income in your tax returns.

Apply for an NRE Account

Keep your foreign currency earnings at home, with a savings and current account denominated in rupees and held in India.

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