January 31, 2023

NRI buying property in India: How to Invest in Real Estate as an NRI

As an NRI (non-resident Indian) or PIO (person of Indian origin), if you have a question, how is NRI buying property in India? What is the Procedure for NRI to buy property in India, What Documents are required for NRI to buy property in India, and How to get a home loan in India as an NRI? Considering all the above questions, we write a guide on, as an NRI, what you need to know to become a land or homeowner in India. We give the required documents below and a list of specific rules and regulations you need to follow as an NRI to buy property in India.

What type of property can NRIs/PIOs buy?

So as an NRI, you can buy immovable property in India, which means NRIs are permitted to purchase commercial and residential properties in India. NRIs cannot buy farmhouses, agricultural land, and similar properties. But to purchase any Property as an NRI, you must follow FEMA (Foreign Exchange Management Act) rules¹.

The Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018, states that an NRI can buy property in India. 

What is the Procedure for NRI to buy property in India?

So As an NRI, there are some mandatory documents you need to submit that include a copy of your Indian passport and visa, the Last six months’ payslip, your Latest income tax returns, your work permit of the country of residence, and some of the property important property documents like title deed, NOC from society, and other required.

Before buying property as an NRI in India, it is important to connect with a local solicitor and notary. For example, if you are interested in investing in the Northern part of India, specifically the Uttarakhand State and the city of Dehradun, you should connect with BDS4Loans. By working with BDS4Loans, you can ensure that the land or property you are investing in is legal, the property documents are proper, and there are no pending loans or debts on the property. This will provide you peace of mind and help you make a more informed decision when investing in property as an NRI in India.

Obtaining the Power of Attorney for NRIs (Non-Resident Indians) to Purchase Property in India

If you’re not in India, you need to give someone a Power of Attorney, which means another person has the authority to act in your place in specified or all legal or financial matters for buying property in India for you. Make sure to get a notarised Power of Authority (PoA) document, so there are no hassles in property purchasing.

Since most lenders demand it, PoA is especially important if you’re financing your property purchase with a home loan. It would help if you assigned the PoA, a Resident Indian citizen.

How a Solicitor Can Protect Your NRI Property Purchase with Due Diligence Checks and Sale Agreement

Ensure that the property you buy is legally sound and that all necessary documents are in order. Due diligence checks are a series of investigations and verifications conducted by a solicitor (a legal professional) to confirm the status and condition of the property you are buying, such as whether there are any outstanding debts or legal disputes associated with the property. The solicitor will also create a “sale agreement.”

The solicitor will also create a “sale agreement,” the legal document in these terms and conditions, purchase price, any contingencies (requirements that must be met before the sale can proceed), and the rights and responsibilities of the buyer and seller are mentioned. 

So a Solicitor will take care of the legal formalities and ensure that the property he is dealing with on your behalf is legal and that all necessary documents are in order before you purchase the property as NRI.

What are the Documents required for NRI to buy property in India?

Here is the list of documents required when as an NRI, you’re buying a property in India:

  • Passport: If you hold a non-Indian passport, you are required to provide proof of NRI status, such as a PIO or OCI card, before purchasing property in India.
  • PAN (Permanent Account Number) card.
  • If you cannot complete the transaction in person, you may authorize another individual to act on your behalf by granting them power of attorney.
  • When registering the purchase of a property, proof of address and identity will be required.

How to get a home loan in India as an NRI

Getting a home loan in India as an NRI is possible, Indian bank offers home loan to NRIs, but the interest rates for NRIs are slightly different compared to residents.

However, As an NRI, you will get a loan depending on the property’s valuation and location, which applies to the residents. 

What are the Documents required to get an NRI home loan?

The documents required to obtain an NRI home loan are:

  1. Application form and passport-size photographs.
  2. Proof of identity (passport, PAN card, voter ID, etc.).
  3. Proof of residence (passport, utility bill, bank statement, etc.).
  4. Proof of income (salary slips, bank statements, tax returns, etc.).
  5. Proof of employment (appointment letter, salary slips, etc.).
  6. Visa copy
  7. Residential status certificate.
  8. Property documents (sale agreement, title deeds, etc.)
  9. Bank statements for the last 1 year. 
  10. In case of employees on ship> contract letter issued by employer with cdc to be uploded(should be verified bank)
  11. Overseas credit report (a) European countries (experian, equifax,transunion)

                                           (b) Middle east countries (agv credit rating agency)

The above documents checklist is expected to be asked from you while applying for the Home loan as an NRI because the requirement of documents may depend on banks to banks.

If the bank sanctioned you the Loan, then the Loan amount would be in Indian Currency. The Loan amount will be directly deposited in the seller or property developer, not your account.

You can pay your loan amount overseas in INR or through your NRE/NRO or FCNR account.

What are NRE and NRO accounts?

As an NRI, it is important to maintain both NRE and NRO accounts in India. 

The NRE (Non-Resident External) account allows for the transfer of foreign income to India, and the interest earned on this account is tax-free. 

The NRO (Non-Resident Ordinary) account manages Indian income sources. It enables foreign currency transfers, making it a valuable tool for purchasing property in India as an NRI.

Tax Implications of NRI Property Ownership in India

While buying property in India, paying property taxes in India together with stamp duties and registration fees is compulsory.

These taxes on NRI Property owners are paid differently if they own a property and rent it out in India. Hence, you need to pay taxes on the rental income received, and if you want to sell the property as an NRI in India, you must also pay taxes.

What are the Taxation benefits on NRI properties in India?

As an NRI, you can also get a taxation advantage on your property through various sections of the Income Tax Act 1961. when taking out a loan to purchase a home, both the principal loan amount and the interest repayment component are eligible for annual income deductions of INR 150,000 and INR 200,000, respectively.

Home loan
B.D.S. is a Private Limited Company located in Dehradun, Uttarakhand, It is founded to provide financial services like home loans, Personal loans, Business loans, Loans against property, Mutual funds, Life insurance, and general insurance to various individuals for their End-use purposes.
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