NRI Can Buy Property in India | NRIs Property Investment Guide

Whether for emotional or economic reasons, the idea of investing in real estate in their home country has always been lucrative for Indians who have settled abroad. The possibility of making a romantic return to the country they were born and brought up in always exists for those who have left India for better employment and opportunities. It is because the love for the motherland is a strong emotion, and none of us can shy away from it.

If you are seeking more information on buying of property by NRI in India, your mind must be buzzing with questions. The first must be, can OCI buy property in India? We have put together this definitive guide with an extensive checklist to address any concerns you may have on this topic.

Who is an NRI (Non-Resident India) ?

Before we explore how an NRI can buy property in India, let’s understand who is an NRI. NRI stands for Non-Resident Indian and refers to an Indian citizen who has resided outside India for more than 182 days in a previous financial year. The FEMA Act of 1999 considers a person residing in India to have spent more than 118 days during the previous fiscal year. The person is someone who came or stayed in the country to work, conduct business, pursue a career, or for any other reason that would specify their intention to stay in India for an undetermined amount of time.

Anyone not meeting the above requirement is considered a Non Resident of India (NRI). Simply said, a person must meet the requirements for a 182-day stay in India and the reason or purpose of the stay to be considered an Indian resident. For citizens to hold an NRI status, they must hold an Indian passport and have Indian nationality. There are currently an estimated 30 million NRIs spread across the world.

Can NRI Buy Property in India?

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You may have wondered, can OCI buy property in India? The answer to that question is yes, a Non Resident of India can choose to purchase property in India. An NRI can buy property in India, be it residential or commercial, and are also eligible for house loans. The Foreign Exchange Management Regulations 2018 allows NRIs to purchase property, both commercial and residential, except those used for agricultural purposes, such as farms, plantations, etc. There are no limitations or curtailments on the purchase of property by NRI in India.

The only people who are permitted to buy farmland, plantation property, or farmhouses are Indian citizens who have a permanent address in India. Any of these categories of property that NRIs inherit must be transferred to an Indian citizen who resides permanently in the country.

Additionally, as an NRI buying property in India, you may give the property to any of the following:

  • Another NRI
  • A citizen of India who lives in the country
  • A person with Indian ancestry who lives in another country outside of India

Key Requirements to Buying a Property as an NRI

NRIs and PIOs are covered by the general authorisation for acquiring and transferring residential and commercial property. You are not required to file any documentation with the Reserve Bank of India (RBI). Once you have identified the property, you must compile the necessary documents and determine whether or not a mortgage is necessary.

As an NRI buying property in India, you can also apply for house loans from numerous Indian banks that are designed for NRIs to make purchases in India. A brief list of banks offering house loans to NRIs is shown below:

  • State Bank of India
  • HDFC
  • Axis Bank
  • ICICI
  • Federal Bank
  • DBS

1) Documents Required to NRIs to Buy a Property in India

Submitting documents is an important requirement in the procedure for an NRI to buy property in India. A copy of your Indian passport, visa, work permit from your place of residency, most recent income tax returns, and paychecks from the last six months are among these documents. Additionally, for an NRI buying property in India tax complications may arise if you do not attach the following documents:

  • PAN Card
  • Salary statements or IT returns
  • Application for a home loan
  • Aadhaar card or utility bills for address proof

2) Power of Attorney

Power of Attorney comes useful when you cannot visit India yourself to finalise the transaction. It gives your agent the authority to represent you in legal procedures like concluding the property acquisition. A power of attorney gives a third-person the authority to go ahead with the purchase of property by NRI in India on their behalf. To avoid problems throughout the property purchase process, get the Power of Authority (PoA) paperwork notarized. Since most lenders need it, PoA is especially important if you’re financing your property acquisition with a home loan. You must choose an Indian resident as the PoA.

3) Accounts for NRE and NRO

It is pivotal for you to keep your NRE and NRO accounts open in India. You can transfer overseas income to India via an NRE account (Non-Resident External). It is tax-free for you to receive interest income from it. You may manage your sources of income from India by using the NRO Account (Non-Resident Ordinary). You may deposit foreign dollars into this account to fund your ambitions to acquire real estate in India.

4) Payment Methods Available for Purchasing Property

As an NRI, you have different payment methods available to pay for the property you purchased. You can make a direct deposit using regular banking procedures into an Indian bank account. Besides this, you can store money in an NRI account that meets the RBI’s and Foreign Exchange Management Act’s rules. While you are at it, remember that foreign currency or traveller’s cheques cannot be used to acquire real estate.

5) Taxation on NRI properties in India

After purchasing the property, you must pay the required property taxes, stamp duties, and registration costs in India. If you opt to rent your property, you must file tax returns in India and pay taxes on the rental gains you earn from it. You must also pay taxes on your property if you subsequently decide to sell it.

However, under several parts of the Income Tax Act 1961, you would be qualified for tax benefits on your real estate assets. If you take out a loan as an NRI to buy property in India, the main loan amount and the interest repayment component are eligible for income deductions of INR 150,000 and INR 200,000 annually.

Can an NRI Get a Loan to Buy Property?

As mentioned earlier, as an NRI buying property in India, you can get a house loan from an Indian bank to buy property in the country. The bank has approved you to repay the loan in Indian rupees. The lender puts the loan money straight into the seller’s or developer’s account rather than crediting it to your bank account. With contributions to either an NRO, NRE or even an FCNR account, you may simply pay back the loan EMIs.

What is a PIO and OCI?

Further status determination of NRI is done based on PIO or OCI. A ‘Person of Indian Origin (also referred to as PIO) is an individual residing outside India who is a resident or citizen of any country (except Pakistan or Bangladesh) and needs to comply with the below points to determine a PIO:

  • Who was an India citizen under the Indian Constitution or the Citizenship Act 1955 (57 of 1955).
  • Who belongs to a region that joined India after August 15th, 1947.
  • Who is an Indian citizen, an individual mentioned in clauses (a) or (b), or the child, grandchild, or great-grandchild of one of such individuals.
  • The spouse of an Indian national or the spouse of a person mentioned in clauses (a) or (b), or (c) who is a spouse of foreign origin.

In August 2005, the Citizenship Act 1955 was amended to create the Overseas Citizenship of India (OCI) Scheme. All Persons of Indian Origin (PIOs) who were either citizens of India on or after January 26, 1950, or eligible to become citizens of India on January 26, 1950, are entitled to register as Overseas Citizens of India (OCI) under the Scheme. Now we proceed to answer the question, can a foreigner buy property in India?

Can a Foreigner Buy Property in India?

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The Indian Government allows NRIs to buy property in India. However, foreigners are exempted from it. The Indian Ministry of External Affairs forbids foreign nationals who do not reside in India or who are not of Indian descent from purchasing properties in India. The ministry has two exceptions reserved for individuals who are diplomats and those who inherit property from an Indian resident or who are foreign nationals living in India.

Farmhouses, plantations, and agricultural land are still not allowed to be purchased. For any purchase or sale, diplomatic employees would need permission from the Government of India and the Ministry of External Affairs.

Conclusion

Purchasing a property is unquestionably one of the greatest Indian ambitions. If you are an NRI, you may have many other motivations to buy a property in India. So it doesn’t matter where in the globe you are; having a house in India is more than just a backup. It is a need. Luckily, this dream of yours can come true as Foreign Exchange Management Act allows you to buy residential and commercial property in India as an NRI.

Being aware of every detail and document when buying a property in India as an NRI will help ease the process because property buying can be complicated. You must create a checklist of every document and requirement and follow it in order. Once finished, prepare to part ways with the other country and spend your golden years in your own country and property.