Date: August 22, 2023 Author: Team Piramal Realty

Can NRI buy property in India? (2024 Comprehensive guide)

Absolutely, and it’s more seamless than many might think. For Non-Resident Indians (NRIs), investing in Indian real estate not only connects them with their roots but also offers significant financial opportunities. The Reserve Bank of India (RBI) permits NRIs to buy both residential and commercial properties in India, making it possible for them to own a part of the country they hold close to heart.
However, there are some regulations to consider, such as the prohibition on purchasing agricultural land, farmhouses, and plantations, unless inherited. This is where Piramal Realty steps in, offering guidance throughout the process, and helping NRIs make informed decisions and find their ideal property.

Types of Properties NRIs Can Buy in India

Residential Houses/Apartments

For NRI buying property in India, owning a house back home isn’t just an investment; it serves as a touching reminder of their origins. Flats, villas, and independent homes offer NRIs a place to return to or a way to generate rental income.

Luxury Apartments

Many NRIs are drawn to luxury apartments in the metros, not just for the financial returns but as a way to experience India’s urban pulse. These high-end properties offer a blend of comfort and elegance, and access to world-class amenities.

Commercial Property

NRIs investing in commercial properties like office spaces or shops feel part of India’s thriving economy, contributing to its growth and securing future income. Such investments in bustling business districts allow them to stay connected to the country's progress.

Residential Land for Construction

Purchasing land in India allows NRIs to dream up a home from scratch—a custom-built villa or cozy retreat that keeps their family legacy alive for future generations to visit and cherish.

Farmhouses

NRIs often choose farmhouses as a peaceful escape, a place for family gatherings, or quiet weekends.

Agricultural Land

Can NRI buy property in India that is Agricultural land? While there are restrictions on agricultural land, NRIs who inherit such land often see it as a cherished legacy, a piece of their family’s story.

Plantation Property

For those drawn to India’s lush landscapes, owning a tea or coffee plantation isn’t just an investment; it’s a way of staying close to India’s natural beauty. With RBI approval, NRIs can connect with the scenic side of India’s agriculture while investing in something uniquely Indian.

The Foreign Exchange Management Act (FEMA)

Navigating the rules around NRI properties in India can seem complex, but understanding the Foreign Exchange Management Act (FEMA) guidelines introduced by the Indian Government in 1999 simplifies it. FEMA provides a clear framework for NRIs looking to invest in real estate in India, allowing them to purchase both residential and commercial properties. However, it’s important to note that agricultural land, farmhouses, and plantation properties fall under restrictions for NRI buyers.

Documents required for NRI to buy property in India

PAN Card
Aadhaar Card
Passport and Valid Work Permit/Visa
Electricity Bill
Salary Slips
Income Tax Returns
Financial Documents for Home Loan Application
Power of Attorney (PoA)
Society’s No Objection Certificate (NOC)
Title Deed, Sale Deed, and, Registration Documents from the seller

Financing options for the purchase of property by NRI in india

Can NRI buy property in India using finance options like home loans? Certainly, for NRIs looking to buy property in India, securing the right financing options is essential. Many Indian banks now offer home loans tailored specifically for NRIs, simplifying the purchase process and making Indian real estate more accessible. NRIs can open NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts, which help in managing and repatriating funds efficiently.

When it comes to home loans, they are generally sanctioned in Indian Rupees, with EMIs also payable in INR. Typically, loan amounts can cover up to 75% of the property value, with repayment tenures stretching up to 20 years or more in some cases. Interest rates on NRI home loans maybe 1-2% higher than those for resident Indians, yet they still offer a cost-effective solution compared to many foreign loans.

A consistent income record, usually over six months, in an NRE/NRO account is often required for loan eligibility, making it essential for NRIs to manage their finances actively.

Tax Implications for Non-resident Indians Buying Property in India

For NRIs, investing in real estate in India can be a rewarding decision, but it’s essential to understand the tax implications involved, especially the tds on the sale of property by NRI. Rental income from Indian properties is taxable, and NRIs must file income tax returns for this income as per the Income Tax Act.

Capital gains tax also applies to property sales, with the rate depending on the duration of ownership. Long-term capital gains (property owned over 24 months) incur a 20% TDS if the property is sold by a non-resident seller. Additionally, NRIs face 1% TDS if purchasing property from a resident when the property’s sale value exceeds ₹50 Lakhs.

During a property purchase, NRIs are responsible for paying all applicable taxes, including stamp duty (5-10% of agreement value) and registration charges (1-4% of property value). For under-construction properties, NRIs must pay an 18% GST. When earning rental income, NRIs must report this on their tax returns and pay tax per the prescribed slabs

Selling a property later also considers the indexed acquisition cost for capital gains calculation, while home loan interest and principal repayment are eligible for deductions under Section 24B.

Where in India should NRIs invest in property?

For NRIs looking to invest in Indian real estate, hometowns are often the first choice, as they provide a sense of familiarity, emotional connection, and easy management with local support networks.

In Maharashtra cities like Mumbai, Thane, and Pune remain top choices due to their robust real estate markets, high ROI potential, and growth in infrastructure. Other metros, including Delhi, Bengaluru, Chennai, Kolkata, and Hyderabad, continue to attract NRIs with their blend of economic opportunities and residential appeal.

Additionally, Tier 1 and Tier 2 cities like Ahmedabad, Kochi, Chandigarh, Jaipur, and Indore are witnessing rapid development, offering a unique mix of affordable investment options and a high quality of life.

Choosing the right property

Non-resident Indians (NRIs) must choose their properties wisely when making real estate investments to reduce risks and increase returns. This decision calls for comprehensive research and due diligence to evaluate all potential options. Location is paramount, as properties in well-established areas with robust infrastructure tend to appreciate more rapidly.

NRIs should consider properties in prime residential and commercial localities for better long-term returns. The type of property also plays a key role in determining potential returns.

Evaluating historical price appreciation and rental trends for various property types can help NRIs identify high-yield options. Properties like city apartments, which offer steady rental income, are often more favorable.

Additionally, the construction status is a critical factor: ready-to-move-in properties present fewer risks compared to under-construction projects.

A Step-by-Step Guide for NRI buying property in India

Step 1: Access your eligibility for purchasing a property
Step 2: Choose the Type of Property
Step 3: Obtain a PAN Card if you don’t have one
Step 4: Decide between self-financing or a housing loan.
Step 5: Find a Trusted Real Estate Agent who specializes in NRI property purchases to navigate legal procedures and paperwork.
Step 6: Research properties and pick one that meets your budget and location needs considering factors like appreciation potential, amenities, and accessibility.
Step 7: Verify Property Ownership
Step 8: Obtain a No Objection Certificate (NOC)
Step 9: Sign a sale agreement outlining the sale terms, payment schedule, and possession date after verifying the property details.
Step 10: Register the Property
Step 11: For newly constructed properties, get an occupancy certificate from local authorities to ensure it’s safe for occupancy.
Step 12: Finalize the purchase by funding it through a home loan or personal funds.

2024 Real Estate Market Trends for NRIs

In 2024, the Indian real estate market is seeing renewed interest from Non-Resident Indians (NRIs). NRIs are increasingly considering buying property in India. This trend is driven by a combination of emotional attachment to their homeland and sound financial investment opportunities.

The Indian real estate market is experiencing a boom, and NRIs are more confident in it due to recent regulatory improvements and a favorable economic climate. For NRI buying property in India is a unique opportunity to connect with their roots and build a secure future for themselves and their families.

Why is investment in India’s real estate a lucrative option for NRIs?

The Indian real estate market offers NRIs a robust opportunity to grow wealth and build long-term assets. With consistent capital appreciation, real estate investments in key Indian cities have delivered promising returns for those aiming to secure financial stability and wealth creation. High rental demand in metros also allows NRIs to generate passive income while holding valuable properties in emerging or high-demand areas.

In addition to monetary benefits, Indian real estate investments allow NRIs to diversify their portfolios and hedge against inflation, providing stability compared to more volatile asset classes. With supportive tax policies like deductions on home loans and indexation benefits, India’s real estate sector proves to be a strategically sound and lucrative investment for NRIs.

Conclusion

In conclusion, the answer to "Can NRI buy property in India?" is a definitive yes. The process is increasingly accessible, with supportive regulations that enable NRIs to invest in residential and commercial real estate, fostering both personal and financial connections to India.

While restrictions exist for agricultural land, farmhouses, and plantation properties, NRIs still have a broad array of options—from luxury apartments in bustling metros to land for custom homes. By navigating the regulatory landscape with proper guidance, NRIs can confidently invest in Indian real estate, creating a tangible link to their heritage and securing valuable assets for the future.

Frequently Asked Questions

Is it a good idea for NRIs to buy property in India??➕

Yes, NRI buying property in India is often a good investment, especially as demand for premium real estate continues to grow. Purchasing property in well-connected urban areas, such as Mumbai or Bangalore, can provide NRIs with both rental income potential and long-term value. Moreover, owning property in India is advantageous for those planning future visits or relocation, as it offers financial security and emotional value.

What are the property rights of NRI in India?➕

Under the Foreign Exchange Management Act (FEMA), NRIs have the right to purchase both residential and commercial property in India without restrictions. NRIs are allowed to own multiple properties but are limited in purchasing agricultural land, farmhouses, or plantations unless acquired through inheritance. These rights make NRI properties in India highly accessible for personal or investment purposes.

What are the tax implications of NRI buying property in India?➕

NRIs are subject to Indian tax laws on property transactions. Income from rental properties is taxable in India, and NRIs can claim deductions under Sections 24 and 80C for loan interest and principal repayment. On the sale of property, NRIs incur TDS (tax deducted at source) and are subject to capital gains tax, depending on the property holding period. Consulting a tax advisor can help NRIs manage their tax obligations efficiently.

Can NRI buy property in India without PAN?➕

NRIs can buy property in India without a PAN, but it is advisable to obtain one. A PAN helps NRIs fulfill tax obligations, particularly if the property generates rental income or if they plan to sell the property later. While a PAN is not strictly required, it simplifies the process for NRIs in tax filings and obtaining TDS benefits on the sale of property.

Do NRIs need an Aadhaar card to buy property in India?➕

No, NRIs do not need an Aadhaar card to purchase property in India. NRIs can proceed with property transactions using their passport, visa, and OCI card as identification documents. While an Aadhaar card is not essential, it may help with certain banking and tax processes if the NRI plans to reside in India or manage income from property within the country.

Disclaimer- This article is based on the information publicly available for general use as well as reference links mentioned herein. We do not claim any responsibility regarding the genuineness of the same. The information provided herein does not, and is not intended to, constitute legal advice; instead, it is for general informational purposes only. We expressly disclaim /disown any liability, which may arise due to any decision taken by any person/s basis the article hereof. Readers should obtain separate advice concerning any particular information provided herein.