NRI’s Guide to Investing in Real Estate in India

This article is for NRIs who want to invest in India, but are not sure how to go about it. Buying property is a dream for every Indian, regardless of which part of the world they live in. The laws have also been liberalised over the years, which has made investment in India quite easy for NRIs. Such transactions are governed by the Reserve Bank of India and the laws are followed as per Foreign Exchange Management Act (FEMA).

As per FEMA NRI is a citizen who is a resident of country outside India. There are several doubts when it comes to investment in property like, can an NRI invest in Indian property or can they apply for a loan and avail tax benefits and many other queries like this.

Let us delve into the solutions.

Does an NRI has the rights to invest in property in India?

There are no restrictions on NRI, for any kind of real estate investment in India, either residential or commercial property, nor is there any limit on the number of residential or commercial properties that an NRI can buy. The only exception is that NRIs cannot buy agricultural land, plantation land or a farm house in India, but there is no constraint on inheriting such properties.

Do you need any special permission from any authority to buy property in India?

There is no requirement for any kind of permission from authorities to purchase property in India.

How to make payment for the property? 

Mode of payment can be opted as per one’s convenience. Either money can be remitted to India from abroad in regular bank accounts or can be sent through NRE, NRO or FCNR account.

Can you apply for a home loan?

NRIs have been sanctioned the permission to take home loans to buy property in India. Loans can also be availed for repairs and renovations of the home.

EMIs on a home loan can be repaid in several ways, like through remitting money from the foreign account or by issuing post-dated cheques or through rental income or through local relative’s bank account.  

Is it possible to give power of attorney to another person for transaction purpose?

Experts suggest that if PoA is given to a person who is a resident of India, it would be easier to execute all the processes related to the property like registration or sale or possession. It would be judicious not to give the whole power of execution at a single point of time and rather give specific power of attorney at a given time like for only sale or only purchase, etc. The PoA should be written on a stamp paper and attested by the authorized official of Indian Embassy or Consulate or Trade commissioner of the particular country. It would be really helpful for you to manage, with a PoA given to a resident in India.

Do you need to pay income tax on properties bought in India?

If a person owns more than one house, then only one will be considered as self-occupied, as per the Indian Income Tax Act. There will be no tax on one property and other properties will be considered to be for rent. Whether the second property is occupied or not, it will be deemed to be given on rent, and the owner will have to pay the calculated rental income tax on the property. This is applicable not just on properties in India, but also if you have one property in some other country and are residing there, the property in India will be considered the second investment and the income tax rules will be applicable for the same.