NRI Buying Property in India - Benefits and Rules

As India sees a rise in the NRIs, which is expected to be a more developed nation and promises a rapid growth of the real estate locations. Investing in the real estate sector has always been beneficial for the NRI population. 

When an NRI moves back to India also means that there will be an increase in the number of properties. However, buying a property as an NRI in India is also not as simple as it looks. According to the RBI guidelines, if you are an NRI or have an OCI card, then you are eligible to buy residential or commercial properties in India. 

It includes a lot of documentation, tax planning, with financial growth and a mix of emotions. 

In this blog, we will guide you to buy a commercial or residential property in India as an NRI and provide you with a detailed process with all the benefits and legal requirements in accordance with the law. 

Who is an NRI? 

An NRI is a non-resident Indian who is an Indian citizen but lives outside India in a foreign country. Or we can say that any person who has not stayed in India for more than 182 days in a financial year is considered to be a non-resident of India. 

FEMA (Foreign Exchange Management Act)

The Foreign Exchange Management Act, 1999, govern the foreign exchange in India, of an NRI buying property, which includes the transfer of funds for the sale. This is a contract dated 29 December 1999, in which FEMA outlined all the policies governing NRI repatriation in India, focusing on payments and external trade in foreign markets. 

FEMA Guidelines for an NRI buying Property in India

As an NRI, there are some eligibility criteria set by the Foreign Exchange Management Act FEMA regulation for any commercial or residential property in India by an NRI. 

It includes all the payments, trades, payment methods, property types, and transfer rules for the NRI property in India in accordance with the laws of India. 

Here are some of the guidelines for the NRI buying property in India given by the FEMA given below:

The eligibility criteria for purchasing a property in India by an NRI

Any NRIs, PIOs (persons of Indian origin) can purchase immovable property in India, like commercial and residential properties in India, except for agricultural and plantation lands in India.

Types of Property in India available to NRIs

Here are some of the properties which are available to an NRI, which he or she can purchase in India, including residential and commercial properties in India. However, an NRI are not allowed to purchase any agricultural and plantation lands in India. 

Property Purchase

NRIs, OCIs can easily buy any commercial or residential property in India. 

Inheritance 

An NRI can inherit the commercial or residential property from any Indian resident or any person who has it legally. 

 As a Gift

NRIs can get the commercial or residential property in the form of a gift from their relatives and close family members who are residents of India, NRIs, OCIs, but they cannot send them agricultural and plantation property as a gift to the NRI. 

Payment Rules for the NRIs

Here are the payment rules fr the NRI who wants to purchase any commercial or residential property in India. 

• To purchase any property in India needs to get funds from only the official banking channels like NRE/NRO accounts in India through the inward remittances, which should be properly maintained by the NRI in India. 
• For the payment methods, NRi cannot use the traveller's cheque, foreign currency notes any other modes which are not specified by the Reserve Bank of India (RBI). 
• While purchasing the property as an NRI, he or she should ensure that the transaction is properly documented and has the source of funds written to ensure that they don't violate any FEMA rules and regulations. 

Rules for the PIOs purchasing poetry in India 

Here are the rules for a PIO (person of Indian origin) who is planning to purchase any commercial or residential property in India. 

• A person of Indian origin can buy any immovable property in India except for the plantation lands and agricultural lands in India.
• A PIO can buy property in India through the funds that they will get from the inward remittance via the NRE/ NRO/FCNR accounts in India. 
• They can receive gifts from the Indian residents, like close relatives or another person of Indian origin. 
• A PIO can also get the inherited lands from an Indian resident or a person who owns the property in India legally under the FEMA laws and regulations. 

Property Purchase by NRIs from different countries

Citizens of Bangladesh, Sri Lanka, China, Afghanistan, Iran, Pakistan, Nepal, and Bhutan need to get special permission from the Reserve Bank of India (RBI) to buy any immovable property or to transfer property in India. Apart from the lease agreement for the last 5 years.

Benefits of NRI Purchasing Property in India 

Purchasing property in India has been a major investment choice for the NRIs, as we can see a spike in India's economy and a rapid increase in the real estate sector. 

Let's look at some of the benefits of purchasing a property in India as a non-resident of India. 

High Indian currency value: When an NRI purchase a residential and commercial property in India, he will get a high value for the Indian currency as compared to other savings.

This will help them to purchase the property at an affordable rate, making exciting deals for the NRIs in the real estate market. Buying property in India can also provide them with a good return, capital growth, and a monthly rental income. 

Provides High Return: Investing in property provides you with the highest return, which you can get as compared to fixed deposits, mutual funds, or the stock market.

Most of the NRIs who invest in residential or commercial properties in India get high returns after a few years of buying the property in India.

Buying property is not just an investment. It is also a way to hedge against inflation and get a better return as compared to most asset classes, and you will also get the more demanding prices as the real estate market rises. 

Easy process to buy a property: Buying property in India is a simple process that covers all currency conversions and tax implications for NRIs purchasing property in India, along with tax exemption from capital gains tax.

For the payments for the purchase of a property by an NRI, you need to directly pay it to the developers through your valid NRE/NRO account bank in India, which is the official way to pay as per the RBI and FEMA rules and regulations. 

Various Property Options: In India, as an NRI, you will get various property options to buy in India, which include premium flats, luxurious villas, and secured and gated communities, which can be available at different prices as per your accommodation. 

If you have a lower budget, then you can go for the studio apartments, which you can get at a low price of 1 BHK and 2 BHK, which are nearly close near all the public and healthcare facilities without impacting your daily lives. 

High in Demand: Purchasing property in India is currently the most demanded investment, which everyone is going for. If you are an NRI, you surely get your residential or commercial property in India, which is one of the most secure and beneficial investments. 

Most people buy luxurious flats and villas and rent them, as it provides them a huge profit monthly, and also they will get a high return within a few years if they sell their property or by leasing the property they can generate a high ongoing revenue, which is again most secure and profitable investments you can make. 

Points to Remember When Buying a Property in India as an NRI

Here are some of the important points that an NRI needs to consider before buying a property in India. 

Legally verified: Make sure the property which you are purchasing is legally verified and in accordance with Indian laws. If you are buying a property as an NRI, you should see all the approvals, which include land use, no-objection certificates, and the construction permission for the property, so you can avoid getting into any trouble or legal disputes. 

Analyse the location of the property: Make sure the property you are buying is close to the location of all the facilities, which include hospitals, bus or railway stations, airports, schools, universities, etc. It also makes the property more available as it connects you to the whole facility. 

Finances and funding of property: an NRI can choose the way of making the payments, either they can get a home loan or pay the funds directly through their valid NRE/ NRO accounts in India. Apart from this, you must set a budget for additional fees like stamp duty registration fees for the property, and for any other legal paperwork. 

Check Developer's Credibility: if you are looking for an under-construction property, then you need to check the developer's credibility, which allows you to track the construction project and grant you the approval for buying the property when it is completed. 

Tax Planning: When an NRI purchases a property in India, they need to see all the tax implications, which include all the TDS, property gains, and capital gains. This will help the NRIs to make financial long-term plans in accordance with all Indian laws and regulations.

What are the Documents Required to Buy a Property in India as an NRI

Here is the list of documents that you will need as a Non-resident of India to buy a property in India to avoid any legal disputes. 

• A Passport: You will need to provide a valid passport, which is important for the identification and citizenship of an NRI.
• PAN Card: An NRI needs to provide their Permanent Account Number (PAN), which is essential for the smooth transaction and for purchasing a property in India. 
• POA (Power of Attorney): If an NRI is not present while buying a property in India, then through the POA, an NRI can get an individual who will do all the legal property transactions. 
• OCI/PIO cardholder: If you have an OCI or a PIO card, then you need to submit it while buying a property in India. 
• Verification of Title: An NRI needs to verify the property's title, which is essential for a smooth property transaction by conducting due diligence. 
• Legal verification: Make sure you have all the documents legally verified, like no objection certificates (NOCs), all the documents related to buying a property, to have a legal and smooth process. 

What are the Steps to Buy a Property in India for NRIs

Purchasing property in India as an NRI includes all the processes from eligibility to the registration of the property. Here are the detailed steps given below that an NRI needs to follow while purchasing a residential or commercial property in India. 

Eligibility Criteria

An NRI can only purchase a residential or commercial property in India. They are not allowed to buy a plantation, agricultural farmhouses, or agricultural land in India. 

Select the Property Type 

There are different types which an NRI can buy, from residential property a commercial property. which both have different legal requirements. 

An NRI can get a ready-to-move-in property which provides safety and all the quick facilities. 

They can get an under-construction property at a low price, but it does not provide them with safety, and there is also a risk of delays in the construction of the property. 

Resale of the property

There are no legal disputes regarding the property of the property by an NRI. 

Understanding the FEMA guidelines

One of the major steps for buying property in India is following all the FEMA guidelines. 

The property should be purchased in Indian currency. 

FEMA govern the rules for the property purchase by NRI in India. 

Payments for the purchase of a property can be made through the NRE/NRO account banking channels in India or by an FCNR account as per the FEMA guidelines. 

Get PAN Card

A PAN card is necessary for purchasing any property in India and for smooth financial transactions. 

Financial options

There are many home loans available to NRIs to purchase their dream property in India. They offer valuable offers to the NRIs.

Here are some of the key points of the home loans and self-funding finance options for the NRIs: 

• The loan eligibility depends on the income, credit score and your bank. 
• There are many bank that offers the NRI up to 70-80% property value ot the NRIs as a loan, which also depends on their credit score and repayment history. 
• The repayments for the home loan or any self-finance funding need to be made through the NRE/NRO accounts in India, and the payments need to be made in Indian currency. 

Gather Documents 

Here are some of the documents which an NRI needs to collect to buy a property in India. 

• A valid passprt
• A valid visa
• Proof of foreign residence
• POA (power of attorney)
• Income proof
• Minimum 6 months' bank statement of an NRI. 

Book a real estate consultant 

To make the process of buying a property in India as an NRI, you should hire a real estate consultant which will help you with the entire process, legal documentation, with fair prices, along with following all the rules and regulations of Indian law. 

Property Selection and Location

Always buy a property which is close to all the facilities, like hospitals, education centres, airports or bus stations, and should be affordable, have a strong infrastructure and have all the legal approval and documentation. 

Verification of Property Ownership

An NRI needs to check the legal ownership of the property and should check that all the documents are legally verified and in accordance with Indian rules and regulations, to avoid falling into fraud or legal disputes. 

Get No-Objection Certificate (NOC)

An NRI should get a No-objection certificate from the Income Tax Department to easily follow all the tax rules while buying a property in India. 

The Sign Sale Agreement

An NRI needs to have a signed sale agreement in which they should provide all he details related to the payments, timelines, and all the safeguard interest conditions. 

Registration of the property by an NRI

Now, an NRI needs to register the property at the sub-registrar's office to transfer all the legal ownership. 

Get Occupancy Certificate 

For the new construction, an NRI needs to get an occupancy certificate, which ensures that the building has followed all the safety norms and is ready to be owned by a person or a family. 

Funding

The last step in the NRI process to buy a property in India is making all the financial requirements, which include all the loan disbursements, and making your ownership more secure. 

Tax Implications for NRI Buying Property in India 

It is essential to understand the tax Implications of an NRI when they are purchasing any residential or commercial property in India.

The stamp duty and the registration fees depend on the state and are only applicable during the purchase of any property. 

Capital gains are subject to the long-term capital gains to NRIs at 20% with various benefits, and the short-term capital gains are taxed according to the income tax slabs. 

TDS Rates on the Purchase of a Property

• If the purchase is more than 50 lakhs INR from an Indian resident, then the TDS rate will be 1%. 
• If the property is purchased from a non-resident, then the TDS rate for the long-term capital gains will be 20%. 
• According the section 195, if a property is on rent, then the applicable cess and surcharge will be 39%, and the TDS rate will be 30%. 

Funding Options for the NRIs on the Purchase of a Property

For an NRI, adjusting the funding option for purchasing a property in India is very important. This can help the NRIs get a simplified process 

Here are some of the main findings given below that will help you to purchase a property in India. 

NRE/NRO Accounts: You can use your NRE and NRO accounts in India for purchasing property in Indian as a Non-Resident Indians. 

Self-Funding: An NRI can also use the foreign investments and savings account for funding to buy a property in India. 

Home loans: Another option for the NRI for the funding of a new property in India is getting home loans, which are especially designed for the NRIs to smoothly proceed with property purchase in India. 

Final Thoughts 

When an NRI decides to buy a property in India, it includes a lot of documentation, tax implications, payment methods, and requires getting a good location and affordable property according to their needs. Doing all this alone can be challenging for the NRIs, so here is the Visament website, which helps the NRIs in buying a property in India in accordance with all Indian and FEMA regulations. 

Visament provides NRIs a simplified process which includes all the legal complications, taxation and all the documentation without any errors or rejections. For more information, you can also talk with our NRI experts who have years of experience and have helped thousands of NRIs globally.