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Any non-resident Indian (NRI), who is interested in buying a property in India, should be aware of certain legal provisions pertaining to the purchase or owning of an immovable property in India under the Foreign Exchange Management Act (FEMA). NRIs and persons of Indian origin (PIOs) are treated at par, for the purpose of investment in real estate.
Types of properties, where NRIs or PIOs can invest
The Reserve Bank of India, through a circular, has given general permission to NRIs, to purchase any residential or commercial property in India. The investor need not seek any specific permission from the RBI, nor is he required to send any communication or intimation in this regard to the RBI. Under the existing general permissions, an NRI can purchase any number of residential or commercial properties. The income tax laws also allow an NRI to own as many residential or commercial property as s/he pleases.
In case the NRI is unable to come to India, the documents pertaining to the purchase can be executed by any person, who is given a valid power of attorney. Under the RBI’s general permission, an NRI cannot purchase any agricultural land or plantation property in India. Consequently, under the existing regulations, NRIs cannot purchase farmhouses in India. So, if an NRI wants to purchase a farmhouse or plantation, s/he will have to approach the RBI for a specific permission and the RBI will consider this on a case-to-case basis.
An NRI can purchase the property, either as a single owner, or jointly, with any other NRI. However, a resident Indian or a person, who is otherwise not allowed to invest in a property in India, cannot become a joint holder in such property, irrespective of the second holder’s contribution towards the purchase.
Continuance of ownership of property, after becoming an NRI
What if a person who owns properties in India, subsequently, becomes an NRI? Such a person can continue to hold the property in his name in India. An NRI is also allowed to continue to own any agricultural land, plantation property, or farmhouse that he owned when he became an NRI, which he is otherwise not allowed to purchase, after becoming an NRI. They are also allowed to let out the property, irrespective of when it was acquired. The rent received from such property, can be remitted, after appropriate Indian taxes have been paid on such rent.
Likewise, any NRI is allowed to sell, or gift an immovable property to any person resident in India. S/he can also gift or transfer any property, other than agricultural property, farmhouse, or plantation property, to any NRI.
Must-knows for NRIs investing in India
- An NRI cannot buy agricultural land or plantation in India. However, they can buy residential and commercial properties. In case there is a reason behind scouting for agricultural land, the Reserve Bank of India (RBI) will review such interest on a case-to-case basis.
- There is no cap on the number of home loans you will be able to take, to buy properties in India.
- If you wish to authorise a trustworthy person, to conduct transactions on your behalf, such as registration of a property, you will need to give them a Power of Attorney (PoA). The PoA holder signs on the NRI’s behalf, by producing a copy of the PoA to the appropriate authorities.\
- Like any other resident of India buying a property, an NRI is liable to pay the required taxes – stamp duty, registration fee, post purchase annual property taxes and even GST in case of an under-construction property.
- You can invest in a property in India to earn rental income, as well. However, you would be taxed at 30% via tax deducted at source (TDS), while the remaining amount may be repatriated under FEMA rules.
- In the case of proceeds that are earned through the sale of an immovable property, it can be repatriated after deduction of between 20% and 30% TDS, depending on whether it is a long-term or short-term capital gain.
Can an Indian with a green card buy agricultural land in India?
Under the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018, NRIs are not permitted to purchase agricultural land or plantation property or farmhouse in India. However, under exceptional circumstances, the RBI may permit an NRI to invest in agricultural property, after reviewing their case.
Can NRIs take home loans from Indian banks?
Indian banks and other NBFCs are open to lending to their NRI customers but the tenure and repayment rates may be higher.
How can my NRI daughter release her rights in a property?
Subject to rules and regulations, an NRI daughter can execute a release or gift deed and release her rights over the property by gifting it to you or any of her relatives.
Is it a good time for NRIs to invest in Indian real estate market?
The Indian property market is stable as of now. Unlike the stock market, it is not volatile and while sales plummeted due to the Coronavirus pandemic in 2020, demand for ready-to-move-in properties has led to a visible boost in the market. However, it will definitely need some more time to revive to a greater extent. At the same time, many NRIs are considering property purchase.
(The author is a tax and investment expert, with 35 years’ experience)
(With inputs from Sneha Sharon Mammen)