Must-know Rules for NRIs for Real Estate Investment in India

by Diksha Sharma Blogger and writer

Real estate has evolved extremely over the past few years. There is better transparency post implication of RERA and GST which has fueled the buying decision of NRI community. Moreover, the Reserve Bank of India has made the rules for NRIs to attract more foreign investment. Below are the important FEMA (Foreign Exchange Management Act) rules that NRIs must keep in mind as all the real estate transactions fall under FEMA.

1) Types of properties to invest in
When it comes to the number of properties to invest in, NRIs have no restriction. They can invest in as many commercial as well as residential properties as they want in India but there is a restriction on foreign investment when it comes to farmhouse, plantation property, or agricultural land. These properties are only allowed in case they are gifted or inherited to the NRI in question.

2)Financial transactions by NRIs

NRIs/ Person of Indian Origin can make payments out of:

● Funds remitted to India via normal banking channel.

● Funds held in NRO/ FCNR(B)/ NRE/ account maintained in India.

● No payment can be made either by foreign currency notes or by traveler’s cheque.

● All the payments need to be made in India.

3) Loan eligibility for NRIs
NRIs/ PIOs can also avail home loans up to 80% of the property value in Indian rupees for the purchase of their property (Depending upon the individual eligibility). Such loans can easily be repaid:

● By way of inward remittance through normal banking channels.

● Through NRE / FCNR (B) / NRO account.

● Through the income of renting property in India.

4) TDS for property sale:

Just like an Indian resident, NRIs can also enjoy most of the tax benefits. They can claim a deduction of 1,50,000 INR under section 80C of the Income Tax Act, 1961. If one sells the property within the three years of purchase then it will be considered as short-term capital gain, and earnings are calculated as the difference between the sale proceeds and the cost of acquisition. The capital gains from such property are taxable. On the other hand, if one sells the property after three years, he/she has the option of reducing the long-term capital gains tax by investing in another property.

The CREDAI (Confederation of Real Estate Developers Association of India) regularly organizes exhibitions for NRIs where they can scan different investment options. Therefore, it is in your favor only to check all the offers from CREDAI and top developers before you invest in real estate in India.