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NRI's Guide

Investment in real estate has always been a trend. In the last two decades, it has become almost everyone's paramount dream to buy a property in India. The purpose behind this motive can be many, but principally it is for residential or investment purpose. Real estate developers are always coming up with some or the other lucrative plans to make these transactions an easy job for non-residential Indians (NRIs), and so is the Reserve Bank of India (RBI). The RBI controls this kind of transactions, and all of these fall under the Foreign Exchange Management Act (FEMA).



Documents required:
  • Pan Card (Permanent Account Number)
  • OCI/PIO Card
  • Resident Visa impressed on the Passport
  • Passport Size Photograph
  • Address Proof
  • Monthly bank statement of a local bank
  • Notarized Power of Attorney(In India)


Documents required:

Tax laws are similar for NRIs as well as for residents. Both can save taxes by investing in real estate properties. It benefits on taxes to non-residential Indians in the same way as it does to Indians. Under Section 80C, one can claim a deduction of Rs 1 lakh. Both are given several benefits on the amount they pay as interest on home loan. In addition to that, both have to pay same registration fee, stamp duty, municipal taxes and a 30% discount on rent for maintenance.


In case a person wants to own more than one property, then only one can be approved as self-occupied. The other should be purchased on the name of parents.


No tax is paid on the self-occupied property. However, if there are more vacant properties, only one should be shown as self-occupied and rest can be taken for as disclosed, and that will add to the taxable income.


If the property in India is rented out, then the income from it would be taxable, and hence, income tax returns shall be filed within the country. One may have to show this rented income in ones country of residence as well and pay taxes there. However, it is not applicable if that country has a Double Tax Avoidance Agreement(DTAA) with India.


If one plans to sell ones property, then capital gain tax needs to be paid, as per the Income Tax Act. However, if the property is occupied for over 36 month then a long term capital gain benefit is given to the owner.


If the property is possessed for 3 years, it is considered as long-term capital gains and hence, is taxed at 20%, and an exemption is claimed by making another investment in property. Further, capital gains may be taxable in the country of your residence, if it doesn't have a comprehensive DTAA with India.


Finance your property

Lenders are ready all the time to fund ones purchase provided all the eligibility criteria are met and papers are clean. Ones educational qualifications and profession plays a pivotal role in the loan approval. Such as, only a graduate NRI can be given home loans in India. It is always advisable to verify papers by a lawyer, check the title paperwork of the property specially if it was jointly owned, inherited or under mortgage. A no due certificate needs to be taken from the developer/seller at the time of transaction to make sure that the property doesn't have any water bill, electricity bill or any other pending bill with the authorities. For new developments, It is made sure that the land title is clear, and the builder has taken all required construction permits and approvals from the civic authorities.


As per the RBI norms, maximum 80% of the total value of the property can be given to the buyers by a financial institutions, and rest has to be borne by an NRI buyer. The whole transaction has to dealt in Indian currency. These lenders assist NRIs with loans for repair and maintenance of the property as well.


Since all the transaction happens through banking channel, the repayment of the loan needs to be done through inward remittance. One can get the money remitted from NRO/NRE account in this country and issue Electronics Clarence Service (ECS) or post-dated cheques from ones Foreign Currency Non Resident (FCNR), NRE or NRO account. The payment can also be made through cheques issued from one's local residence bank account or by using the rent in case the property is laid out.


Power of Attorney (POA)

If one plans to buy an under-construction property, the developer might ask for a power of attorney (PoA) clearance favouring them as this makes the documentation related work comparatively easier and quicker.


A PoA can be given for anything including mortgage, deeds, contracts, lease or sell, and it needs to be worded well by a professional lawyer who you trust.


If you want to sale or dispose your property, it is always recommended to get in touch with an Indian POA who can complete registration, possession and execution of agreement efficiently.


Regulations on Sale of Property for NRIs:

According to FEMA rules, NRIs can freely purchase or sell any immovable property except plantation, agricultural land or farm house property that one has acquired or inherited in India. In case of farm house, agricultural properties and plantation, these can only be sold to Indians. However, it can always be gifted to an NRI or an Indian.


There are some certain RBI guidelines that needs to be adhered to in case of repatriation of sales process.


An NRI buyer needs to decide whether he/she wants money as repatriate or not. If one wants to repatriate, the transaction has to be made in from a foreign currency from an overseas account, NRO, NRE, FCNR or foreign exchange remittance. The repatriation can be made up to the invested amount in the property.


  • Examine carefully all the payment documents. The property can be under single or joint ownership basic. If there is any difficulty, a certified copy needs to be obtained from the local registrar's office.
  • Collect No-encumberence certificate of the last 30 years to make sure that no mortgage is outstanding at the time of purchase.
  • Consult a lawyer in regards to the documents, who can further verify if the clear title can be forwarded to the buyer.
  • Get needed clearance as per the Urban Land (Ceiling and Regulation) Act.
  • It is absolutely recommended to buy the property from a reputed developer who has a perfect record. In case of a third party, always vindicate if he/she possesses power of attorney to make transactions.
  • Seek an advice from a registrar to verify if the price quoted is correct as per the market value.
  • Understand 'terms and conditions' of the property you are going to buy.