Who is an NRI?

A non-resident Indian is a person who is an Indian citizen, but currently resides outside India. This individual does not live or dwell in India for over 180 days in a year, often due to work commitments or settlement abroad.

FEMA guidelines for NRI buying property

Understanding the eligibility criteria imposed by government of India is important for NRI buying property in India. It outlines permissible property types, payment methods, and transfer rules – ensuring compliance with Indian laws. The guidelines described below simplify the legal framework to help NRIs take informed decisions.

1. Eligibility Criteria:

   NRIs and PIOs (Persons of Indian Origin) can purchase any immovable property in India except for agricultural land, plantation property, and farmhouses.

   
   

2. Types of Properties:

   When it comes to NRI buying property in India, residential or commercial properties are allowed, but agricultural land, farmhouses, and plantations are not.

   
   

3. Purchase:

   NRIs can acquire residential or commercial property from Indian residents, other NRIs, or OCIs – under FEMA rules.

   
   

4. Inheritance:

   NRIs can inherit any immovable property from an Indian resident or a person who acquired it legally.

   
   

   
   

Benefits of NRIs Buying Property in India

With the country’s growing economy and expanding real estate sector, NRI buying property in India is becoming a smart investment choice. From favourable currency exchange rates to simplified buying process, there are numerous benefits that make the Indian property market an attractive option for NRIs. Here is a closer look at the key advantages for NRI buying property in India.

1. Value for Indian Currency:

   NRI buying property in India get better returns compared to traditional savings. The currency conversion rate of $1 to about ₹84 makes property purchases affordable for NRIs, turning foreign earnings into excellent real estate assets. Over time, these investments can appreciate significantly, providing capital growth and rental income – unlike simple savings that might yield minimal returns.

   
   

2. Potential for High Returns:

   Compared to gold, fixed deposits, and the unpredictable stock market, real estate provides more stable returns. While other investment avenues may have fluctuating or limited returns, real estate often appreciates over time, yielding profits through resales or rental income. NRI buying property in India can benefit from the consistent demand and rising prices in the Indian real estate market – that have the potential to beat inflation and give better returns than most asset classes.

   
   

3. Simplified Buying Process:

   NRIs can enjoy a hassle-free property purchase process in India. From easy currency exchange to tax incentives like exemption from capital gains tax, the buying process is well-suited to NRIs. Payments can be made directly to the developer’s account or through an NRO account, making it straightforward. With the right documentation in place, NRI buying property in India can expect the entire transaction to be efficient and smooth.

   
   

   
   

Documentation Required for Buying Property in India for NRIs:

Proper documentation not only ensures compliance, but also helps in avoiding legal complications when it comes to NRI buying property in India. Below is a summary of the documents required:

• Valid Passport: A passport is mandatory to establish identity and citizenship
• PAN Card: A Permanent Account Number (PAN) is essential for property transactions, enabling compliance with taxation
• OCI / PIO Card: If applicable, the Overseas Citizen of India (OCI) or Person of Indian Origin (PIO) card is necessary
• Power of Attorney (POA): If unable to be present physically, NRIs can grant POA to a trusted individual for property transactions
• Title Verification: Conducting due diligence to verify the property’s title is important for a secure transaction
• Legal Clearances: Check for completion certificates, no-objection certificates (NOCs), and other approvals, to ensure all aspects of the property are legally sound.
• 
  
• 
  

Tax Implications for Non-resident Indians Buying Property in India:

When it comes to NRI buying property in India, it is important to understand the tax implications:

Stamp Duty & Registration Fees: These are applicable during the purchase and vary by state

Capital Gains Tax: NRIs are subject to long-term capital gains (LTCG) at 20% with indexation benefits, and short-term capital gains (STCG) taxed as per the income tax slab.

Real Estate Market Trends for NRIs:

The NRI buying property in India market has seen a significant rise in recent years. According to a NoBroker report, NRI's share grew from 10% in 2019-2020 to 15% in 2023, with projections reaching 20% by 2025. This growth is largely driven by demand for luxury properties, improved rental yields (3-5%), and capital appreciation in major cities.

Moreover, a JLL India report highlights that 44.4% of land transactions between 2022 and 2023 occurred in Tier-2 and Tier-3 cities, indicating strong interest in emerging markets. These evolving dynamics make NRI buying property in India an increasingly attractive investment.

Conclusion:

NRI buying property in India offers a blend of financial opportunity and personal connection. With the country’s expanding real estate sector, NRIs can benefit from appreciating capital values, rising rental yields, and relatively straightforward purchase process. However, ensuring legal compliance, understanding tax implications, and choosing the right location are vital to taking informed decisions. By following the guidance provided in this blog, NRIs can approach property investments with confidence – creating a strong foundation for future returns and personal ties to India.