Can NRIs Purchase Property in India? Everything You Need to Know

As an NRI (Non-Resident Indian), you may be wondering whether purchasing property in India is possible or beneficial. With the growing appeal of real estate investments in India, many NRIs are keen to explore opportunities to invest in property back home. However, navigating the legalities, rules, and regulations can be tricky, and it’s essential to understand the specifics before taking the plunge.

In this blog, we’ll answer all your questions about purchasing property in India—everything you need to know to make the process smooth, efficient, and profitable.

Can NRIs Buy Property in India?

Yes, NRIs can purchase property in India. The Indian government allows NRIs to buy residential and commercial properties under certain guidelines. However, there are a few essential factors to keep in mind before proceeding with any property transactions. Let’s break down the process.

According to Concorde Research, the Indian real estate market is expected to grow at a compound annual growth rate (CAGR) of 9% from 2023 to 2028, driven by strong demand from both residents and NRIs. This underscores the growing appeal of real estate investments in India.

1. Types of Property NRIs Can Buy

NRIs are permitted to buy both residential and commercial properties in India, but there are certain limitations and conditions:

Residential Properties: NRIs are allowed to buy residential properties for personal use or as an investment. There are no restrictions on the number of residential properties an NRI can buy, provided the properties comply with the regulations set by the government.
Commercial Properties: NRIs can also purchase commercial properties in India. These properties can be used for business purposes or as investment assets. However, the acquisition of agricultural land, plantation property, or farmhouses is not permitted for NRIs.

According to Knight Frank’s India Real Estate Report (2023), the NRI segment contributed 15% to the total residential property sales in major metropolitan cities. This demonstrates the significant interest NRIs have in India’s real estate market.

2. Eligibility Criteria for NRIs to Buy Property

While NRIs can buy property in India, they must meet certain eligibility criteria:

Non-Resident Indian Status: To buy property in India, the person must be a Non-Resident Indian (NRI), which means that you must have lived outside India for more than 183 days in the previous financial year.
Indian Citizen: NRIs must be Indian citizens by birth or descent. Persons of Indian Origin (PIOs) or Overseas Citizens of India (OCI) can also purchase property under the same guidelines, but there may be slight variations in the rules for them. If you are an OCI or PIO, it’s important to check specific regulations that may apply.
Income Source: You must have a source of income from abroad or be engaged in business or employment outside India. The income used for purchasing the property must be from legal and legitimate sources.

3. What is the Legal Framework for NRI Property Purchases?

The legal framework for NRIs purchasing property in India is primarily governed by the following regulations:

Foreign Exchange Management Act (FEMA): This law governs the financial transactions and real estate purchases of NRIs in India. It allows NRIs to buy property but restricts the purchase of agricultural land, plantation property, or farmhouses.
Reserve Bank of India (RBI): RBI guidelines play a significant role in regulating the financial transactions involved in purchasing property in India. NRIs are required to follow the RBI rules for repatriation of funds and for utilizing remittances.
Property Ownership Laws: NRIs can own property just like Indian residents. The property can be bought in their name, or it can be co-owned with an Indian resident.

4. Funding the Property Purchase

When it comes to financing the purchase of property, NRIs have several options. These include:

Funding Through NRE/NRO Accounts: NRIs can use their NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts for making payments related to property purchases. Funds from abroad must be transferred to these accounts before making a purchase.
Home Loans for NRIs: NRIs can avail of home loans to finance their property purchase in India. According to the India Brand Equity Foundation (IBEF), the demand for home loans in India has increased by 10-12% annually, partly due to the growing NRI segment. Many Indian banks and financial institutions offer home loans to NRIs. The eligibility for a loan is based on factors like income, credit history, and the country of residence. Additionally, NRIs can claim tax benefits under Section 80C and Section 24 on principal and interest payments.
Payment Methods: Payments for property purchases in India must be made through Indian banking channels—using NRO or NRE accounts, or via inward remittances. Foreign currency or traveler’s cheques cannot be used for property payments.

5. Taxation on Property Purchases and Ownership

As an NRI, there are several tax implications to be aware of when purchasing property in India. Here are the main points to consider:

Capital Gains Tax: If you sell your property in India, you will be subject to capital gains tax. Short-term capital gains (for properties held less than 2 years) are taxed according to your income tax slab, while long-term capital gains (for properties held for more than 2 years) are taxed at 12% after indexation.
Rental Income Taxation: Any rental income earned from your Indian property will be subject to TDS (Tax Deducted at Source) at 30%. However, you can claim this tax back by filing your Income Tax Return (ITR).
Tax Benefits on Home Loans: NRIs are eligible to claim deductions under Section 80C for principal repayment (up to ₹1.5 lakh) and Section 24 for interest payment (up to ₹2 lakh). This helps reduce your taxable income in India.
Repatriation of Funds: NRIs can repatriate the sale proceeds of property to their country of residence, but there are specific procedures and limits. For instance, you can repatriate up to ₹1 million per financial year from your NRO account, provided all taxes are paid.

Learn more about Tax on rental income for NRI here.

6. Power of Attorney (PoA) for Property Transactions

As an NRI, if you are unable to be physically present in India for the transaction, you can execute a Power of Attorney (PoA), giving someone you trust the legal authority to handle the purchase or sale of property on your behalf. This is especially useful for property registration and other formalities. Ensure that the PoA is registered with the appropriate authorities to ensure its legality.

7. Legal Considerations: Title Deed and Registration

Before purchasing property, it’s crucial to verify the property’s legal status. Make sure to:

Verify Ownership: Confirm that the seller has a clear title to the property, and there are no disputes or encumbrances.
Check for Approvals: Ensure that the property has all necessary approvals from local authorities, including construction permits, land use, and zoning.

Once the property transaction is complete, it must be registered with the local sub-registrar office to make the ownership legally binding.

Investment Hotspots for NRIs in India: Lonavala, Gurgaon, and Kerala

Lonavala: Lonavala, located in the Western Ghats, is a prime location for vacation homes and weekend getaways. According to Magicbricks, Lonavala’s real estate market has witnessed a growth of approximately 10-12% in property prices over the past two years. NRIs are increasingly investing in second homes in Lonavala, driven by its proximity to Mumbai and Pune. Additionally, the rise of tourism in the area makes it an attractive option for rental income generation.
Gurgaon: Gurgaon, also known as Gurugram, has become a major hub for both commercial and residential real estate. According to ANAROCK Property Consultants, Gurgaon saw a rise in demand for premium properties, especially from NRIs. As of 2023, NRIs accounted for nearly 20% of the total residential property buyers in Gurgaon. The city’s infrastructure, proximity to Delhi, and status as a corporate hub have made it a preferred investment destination, with an annual rental yield averaging between 3% – 5%.
Kerala: Kerala has long been a popular destination for NRIs, especially from the Gulf countries. The real estate market in Kerala has shown consistent growth, with areas like Kochi, Trivandrum, and Calicut witnessing an average price increase of 7-9% annually. According to Housing.com, demand for properties in Kerala surged by nearly 15% in 2023 due to the influx of NRIs looking for both retirement homes and rental income investment properties. Kerala’s natural beauty, strong tourism industry, and relatively low cost of living make it a favorable option for long-term investments.

How Rhythm ResiTel® Can Help

At Rhythm ResiTel®, we help NRIs navigate the property buying process in India with ease. Whether you’re looking for a home for personal use, a rental property, or an investment property in India, we provide end-to-end services, including:

Expert Guidance: We help you understand the legal, financial, and taxation aspects of property ownership.
Property Search and Selection: We offer suggestion of the best investment properties available that are suitable to your needs.
Connecting with Trusted Professionals: If required, real estate lawyers to chartered accountants, we connect you with trusted professionals who can assist with legal matters, taxes, and documentation.
Hassle-free Transactions: We ensure that your property purchase is seamless and that all the paperwork is handled correctly.

Conclusion

Yes, NRIs can absolutely buy property in India! Whether you are investing for the future, securing a place for family, or looking for a profitable real estate venture, purchasing property in India offers great potential. With the right information and guidance, the process can be simple and hassle-free.

At Rhythm ResiTel®, we’re here to guide you every step of the way, from understanding the legal requirements to finalizing your property purchase.

Ready to invest in India’s real estate market? Contact us today, and let’s make your property dreams a reality!