NRI Guide To Buying Property In India

NRI Buying Property in India

Owning a home is a wish everyone has whether it is in your own country or another. Being able to buy a house of your dreams is not just a wish fulfilled, but it is also a way to announce that you have made it. However, buying is not as straight forward as liking a place, paying for it and getting ownership. You need to follow the rule and regulations of the country, especially if you are an  NRI and planning to buy property in India

Obtaining an asset in India has at all times remained the greatest dream of quite a few non-resident Indians living in diverse nations. More than their want to live here, several NRI’s believe that Indian property bazaar is one of the top investment opportunities, which will get them respectable earnings in a few years. With the high demand for homes and the government’s aim to attract more funds into the property sector, the rules have been modified to facilitate an easy purchase process for NRI’s.

Now is the best time for you to invest in India, especially if you are an NRI (non-resident Indian) preparing to purchase a property. Though India’s realty segment has seen a price rectification in the recent past, obtaining property in India has also turned out to be more profitable with promising exchange rates. Here is the complete NRI guide to buying property in India.

Here Are a Few Things To keep in Mind When You Are an NRI or PIO Buying Property in India

FEMA Rules

Buying an asset, especially a house in India are subject to rules set out by the FEMA i.e. The Foreign Exchange Management Act. An NRI is defined as a resident of India, but living outside the country. Understanding the entire process is vital to be able to buy a house in the country.

Type of Property

According to the law, all NRI’s and PIO’s are eligible to buy any commercial or residential assets anywhere in the country without informing or asking for permission from the RBI. However, the exception to the rule – a non-resident Indian cannot buy agrarian land, farmstead or estate lands. He or she can’t gain ownership of such land even if it is gifted. The only way to own such land is by inheriting it. To obtain an agrarian land, estate property, a farmstead in India, they must acquire a special sanction from the RBI and the Government of India.

Monetary Transactions

Although a PIO or NRI obtaining a fixed asset in India does not entail any unusual authorization, the payment for such transactions cannot be completed in a currency other than the country’s currency. As an NRI or person of Indian origin, you can buy the asset using the Indian currency, the Rupee, from funds available in the country through standard financial channels. These funds must be kept in a non-resident banking account as per the Reserve Bank of India (RBI) rules and the Foreign Exchange Management Act (FEMA). You can also pay using post-dated cheques or transfer using ECS services from their NRO, NRE or Foreign Currency Non-Resident account (FCNR)

Number of Properties

A non-resident Indian or person of Indian origin can buy any number of housing or commercial properties within the country.

Permanent Account Number

You must ensure that you have a PAN number. You may need it to file income returns if you receive income from renting the property. It is mandatory while the property is being registered.


Just acquiring an asset does not attract income tax. Though, any profits ensuing from the possession of the property, in the form of a lease or wealth gains whether short term or long term rising from the sale of the house is taxable. When a PIO or NRI sells a property in India, a tax is deducted at the source (TDS). The tax amount is calculated at 20.6% on long-term wealth gains and 30.9% on short-term wealth gains. Still, the ultimate assessment rate is the same for both Indian citizens and NRIs. If an NRI is eligible for a lower tax slab then, he or she can apply for a TDS refund by filing an income tax return.


PIO’s and NRIs can also profit from India’s Double Tax Avoidance Agreements (DTAA) with several countries like the USA, UAE, etc., making it an effective to set off taxes paid in one country against the other.

Repatriate the Profits

Even if you don’t require special permissions to purchase an asset, you need to acquire prior sanction of the RBI to repatriate the profits from a sale. This rule is applicable only if you have acquired this asset by way of a purchase. The amount sent back cannot be more than the original sum paid for the assets. But, the NRI can send back an amount that is equal to $1 million each fiscal year in the following conditions

  • If the assets were attained as a gift, then the sale profits must be deposited into an NRO account and repatriated thereafter.
  • If the asset was purchased out of the funds available in the NRO account.
  • If the asset was inherited from an Indian citizen, the money can be transferred on furnishing documented proof verifying inheritance, a certificate of an approved CA in the Central Board of Direct Taxes prescribed format as well as an undertaking by the NRI/PIO.
  • If it is a residential asset, then repatriation of the sale profits is limited to lower than or equal to 2 properties.
  • A foreign national can send back sale income even if the asset was inherited from a person outside India. However, prior authorization of the RBI must be attained.
  • A resident of Bangladesh, Pakistan, Sri Lanka, Afghanistan, China, and Iran should pursue explicit consent from the RBI for repatriation of sale earnings.

Home Loan

Financial institutions offering housing loans and banks registered with the National Housing Bank to offer loans to PIO’s and NRI’s to buy residential properties in India have general permission from the Reserve Bank of India to do so. Home loans are sanctioned in Indian currency. This amount cannot be directly credited to the PIO or the NRI’s account and is paid to the seller or the developer’s account. The loan must be repaid in the same currency using money from the NRO/NRE or FCNR balance in an NRI’s account.

Power of Attorney (POA)

Since NRI’s often live outside the country they have the option to give their relatives or friends the power of attorney to complete the purchase process in India on their behalf. The POA can specify the rights of the representative can exercise or be a general that offers the same rights to the representative as the principal, in this case, the NRI. Other than the tips mentioned above, the NRI or PIO is offered receives the same treatment as any other citizen of India.