NRIs are Indians based in a foreign country spending 182 days in a particular financial year on foreign soil. They always have a question running back in their heads: whether they can buy property in India. Various laws have made it possible to build a buy property in India for NRI.
India is becoming a more significant real estate market, which attracts NRIs to invest in property. But how can NRIs buy property in India? The right document, adhering to compliance, and following every framework can make it convenient for NRIs to buy property in India.
Are you struggling with the documentation or steps to buying property in India as an NRI? Keep reading the blog, as we will cover a complete guide to the NRI property buying process in India.
Can NRI Buy Property in India?
NRIs can purchase property in India when they comply with the right regulations and submit the relevant documentation. Whether getting loans for building commercial or residential property, NRIs can remain eligible for all.
According to the foreign exchange management regulation passed in 2018, NRIs are granted flexibility to purchase residential and commercial property. However, the process of buying property in India as an NRI comes with certain restrictions, as some properties, such as farms and plantations, cannot be bought by NRIs or require approval from RBI.
Purchasing farmland, plantation property, or farmhouses is only permitted for Indian citizens residing in India permanently. An NRI who inherits any of these types of property must pass it on to a citizen of India residing permanently in the country.
A NRI who purchases property in India may also transfer it to the following people:
- Another NRI
- An Indian citizen residing in the country
- An Indian living outside of India but with Indian ancestry
Types of Property NRI can invest.
There are two types of property investment options for NRIs in India. Some require no permission, whereas others may require approval from RBI.
1. Residential and Commercial Property
The Reserve Bank of India (RBI) provides NRIs with general exemptions for owning residential property and investing in commercial property. The RBI is not required to approve this action and doesn’t have to be informed. Currently, NRIs can purchase several homes or commercial properties of their choice.
2. Agricultural and Plantation Property
NRI cannot directly purchase agriculture and plantation land as it is required to comply with the regulations. Any Indian citizen can act on behalf of NRI to purchase the land, ensuring they have a valid Power of Attorney. NRIs are restricted from purchasing agricultural or plantation properties in India under the RBI’s general authorization. The current restrictions prevent NRIs from purchasing farmhouses in India. All those NRIs looking to purchase agricultural land in India must apply for permission from the RBI.
Documents Required for NRI to Buy Property in India
NRIs need to submit the documents required for property purchases in India. The following are some of the documents required by NRIs to buy property in India:
1. Passport
The NRI must have a valid passport to affirm his or her identity. It is essential that the passport, when purchased, has a valid visa and is not damaged.
2. Overseas Address Proof
It is necessary for NRIs to provide proof of the addresses of their overseas locations. Typically, it takes the form of a license, utility bill, or financial statement.
3. PAN Card
A PAN card is the most necessary documentation for NRIs looking to buy property in India. NRIs can easily apply for PAN cards online or by contacting the Indian embassy.
4. Sale Agreement
Sale agreements summarize the conditions and terms of the property transaction, such as the sale price, the payment schedule, and possession dates.
5. Title Deed
A title deed is a document that conveys ownership of the property. NRIs want to ensure that the title deed contains no obligations or disputes with legal authorities.
6. Bank Account Details
Bank account details are a mandatory documentation requirement that NRI must have while proceeding further to the NRI property building process in India. To facilitate transfer funds for the purchase of the property, they must set up Non-Resident Foreign Exchange (NRE) or Non-Resident Ordinary Account (NRO).
Steps for NRI to Buy Property in India
NRIs understand the growth prospects of the real estate industry in India, and there is no better chance than now to invest in property. This gives them financial security and stability while on the move. Some people face challenges while building property in India. Here, we have put together easy Steps to buy property in India as an NRI.
1. Getting Permissions
There is no preset requirement for NRIs to apply for permission to purchase property in India. The property can serve any purpose, from commercial to residential. Luckily, Indian law does not require or restrict the purchase of property in India for NRIs. Even NRIs do not need specific permission from the Reserve Bank of India (RBI), as RBI has granted general permission to all NRIs.
Still, there are some properties that NRIs cannot buy, like Agricultural lands, plantation lands, and farmhouses. If you have eyes on these properties, there are some limitations or restrictions. To buy these types of property, you will require approval from RBI.
2. Getting the Property Ownership
According to Indian law, Non-Resident Indians have the complete right to own residential and commercial property in India, as stated in the Foreign Exchange Management Act (FEMA) and RBI guidelines. However, NRIs need to use the Indian Rupee to finance a home loan. Besides that, the law also states that NRI can purchase property in joint ownership with Indian citizens if they follow all the eligibility requirements.
3. Power of Attorney
Having a Power of Attorney is an important step for an NRI buying property in India. A power of attorney grants other individuals the right to act on behalf of the NRI and oversee the property-buying process.
However, the law states all the documents involved in the property buying process must involve the signature of both parties and are subject to verification with the registrar in the relevant jurisdiction. The Consulate of the country where the NRI resides should certify the Power of Attorney selected (a family member) if the NRI cannot participate personally in the purchase process.
4. Payment Options
NRIs can purchase property in India only in Indian currency. Regardless of your home country, you must still pay in Indian currency.
5. Loan
NRIs can apply for a home loan to purchase property in India. There is no certain limit on the amount of loan NRIs can get. However, the interest rate may vary with each lender. Several banks and Non-Banking Financial Companies offer loans to NRIs. Purchasing property in cities like Mumbai can lead to higher property rates, so applying for a home loan is the ideal choice.
6. Taxes and Charges
Taxes are imposed on all income derived from properties in the country. Tax deducted at source will be charged on rental income the property earns. The TDS on long-term capital gains is 20% on resales, while the capital gains tax on short-term gains is based on the NRI income tax slabs. Also, NRIs are subject to stamp duty, registration fees, GST (Goods and Services Tax), etc.
Tax Implications for NRI Buying Property in India
NRIs looking to purchase property in India must comply with all the tax compliance. Here are the top tax implications every NRI must consider while closing a property deal in India:
Income Tax
Income tax is a crucial tax every NRI needs to pay when buying property in India. From earning rental income from the property to getting capital gains from selling, income tax must be paid on these profits. It depends on the type and amount of income to determine the tax fee.
Property Tax
Property tax is the next important tax implication NRIs must pay to the local municipality where their property is located.
TDS
While selling the house, you must deduct Tax Deducted at Source (TDS) at a charge of 20% (plus surcharge and cess). The TDS will be deducted from the stamp obligation cost if the sale price exceeds the stamp duty value. NRIs are required to pay capital gains tax on the income from the sale of property. Taxation may vary based on the duration of ownership and the income generated.
Double Taxation Avoidance Agreement (DTAA)
Indian government agencies have signed DTAA agreements with some popular countries to eliminate double taxation. If you owe taxes in your home country, you can make a deposit for the tax paid in India.
Conclusion
Building a property in India has always been NRI’s priority, as it has seen significant current and future growth in the real estate market. Various Indian laws and regulations have made it easier for NRI to purchase property in India. If you are unable to look for property in India that meets your preferences, Brick & Bolt is a reliable choice to construct the property that meets your property requirements on the go. As a leading construction company in India, we specialise in constructing a property that fulfils every design and property layout need. Contact us today to fulfil your dream of owning a property in India.