An NRI’s Guide to Buying Immovable Property in India

An NRI’s Guide to Buying Immovable Property in India

The Indian real estate sector is one of the biggest wealth creators for the economy. The market is set to see an upward growth trend in the coming years. It is projected that by 2025, Indian real estate will account for about 13% of the economy.

For NRIs staying abroad, owning a piece of land in India can be an exciting but daring prospect. Investing in a far-away location can be tricky. There are rules and guidelines to follow and market trends to be aware of before you can make the purchase.

However, purchasing land in India need not be a messy ordeal. Read through this guide to understand how you can also be a part of the booming real-estate sector in India.

RBI Guidelines for NRIs to Buy Property in India

The Foreign Exchange Management Act, 1999 has defined the term NRI as a person residing outside India who is either a citizen of India or is a Person of Indian Origin (PIO). The FEMA act also empowers RBI to prohibit, restrict or regulate the acquisition or transfer of immovable property in India by NRIs and PIOs.

An NRI or a PIO can purchase any immovable property in India apart from agricultural/plantation land and farmhouse. He can also transfer his immovable property in India to a person residing in India, an NRI, or a PIO resident outside India. However, agricultural lands, farm-houses, and plantation properties can be owned by an NRI only when it is inherited or gifted.

RBI has stated certain rules on how you can make the payment for your property. The purchase made can be paid through the following options:

  • Normal banking channels through inward remittance from any place outside India
  • By debit to the person’s NRE / FCNR(B) / NRO account

Please note that any other form of payment, such as traveler’s cheque and foreign currency notes is not allowed. On the other hand, you can avail of NRI home loans in Indian rupees through several banks that offer such facilities. Depending on your eligibility, a maximum of 80% of the property value can be paid through loans.

For the first property owned, you will have to pay a wealth tax of 1% of your property value is more than 50 lakhs. Wealth Tax can be waived in case the property is self-owned and vacant. For subsequent properties, Wealth Tax is calculated at 1% of the asset value if it is priced at more than 30 lakhs.

While selling a property, TDS will be calculated at 20.6 % on long-term capital gains and 30.9 % on short-term capital gains. You can file for a refund of the TDS in case you fall under a lower income bracket. You are also allowed to claim exemptions under section 54 and Section 54EC on long-term capital gains.

Documents Required to Buy Property in India

You will need an NRE/NRO or an FCNR account to remit funds for your transactions. Apart from that, you will also need the following documents:

  • passport
  • address proof
  • permanent account number (PAN card)
  • recent photograph

In case you are applying for an NRI home loan, the bank may ask for some supporting documents. Salary slips, income tax submission proof, etc. may be needed to prove eligibility criteria for the loan.

Best Cities to Invest in Real Estate in India

The emerging metropolitans of India have some of the steepest land prices in the country. Because of the high demand for both residential and commercial projects in these cities, a flurry of investment opportunities is emerging across the country. Investment in Tier-II cities is gaining traction in recent years. However, the most popular cities for investments are:

  • Delhi NCR – Gurgaon, Noida, Faridabad
  • Mumbai – Borivali, Mulund, Navi Mumbai, and Thane
  • Bengaluru – Whitefield, Marathahalli, Hoskote
  • Hyderabad – Adibatla, Manakramguda, and Gachibowli
  • Pune – Wakad, Undri, Keshav Nagar, Wagoli

A Word of Caution: Read This Before You Invest Abroad

Like any other investment, the real estate sector is also fraught with risks. Nothing beats doing your own ground research and using common sense to avoid buyer’s remorse. Check out these helpful tips to avoid common pitfalls during real-estate transactions.

Ask your Relatives: If you have family or relatives staying in India, take advantage of local knowledge. Ask them to research viable investment options and trustworthy developers.

Power of Attorney: A POA empowers someone else to execute contracts on your behalf. It is helpful when you cannot be personally present to complete legal formalities. If you are looking to buy under-construction property, your developer may need a POA favoring them. Get advice from your lawyer before drawing up such agreements.

Verify Developer: Do a background check on the financial health of the developer. Research on the number of projects delivered, delivery timeline, and reputation in the market. It is also a good idea to understand the quality of construction provided by the builder.

First-Hand Site Inspection: For under-construction sites, land should have clear titles and builders should have pre-approved legal sanctions, such as completion certificates. Check out the building plan, ground layout plans, and amenities provided.

Documents Verification: Ask your lawyer to verify the land deeds before making a purchase. Verify there is no legal case pending, especially if it is inherited or jointly owned. Get a release note from the bank in case it was under mortgage. A no-dues certificate from the seller should ensure there is no pending water or electricity bill.

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