How NRIs Can Buy Property in India

Buying property in one's home country is a wise investment decision for non-resident Indians (NRIs). The Indian real estate market has grown steadily over the years, presenting lucrative opportunities for NRIs looking to invest. As an NRI, you have the option to purchase both residential and commercial properties in India. This article explores the various aspects of NRI real estate investment including the types of properties they can buy, documentation requirements, financing options through loans, applicable taxes, and more.

Types of properties NRIs can purchase in India
 

As per the Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2018, NRIs have relatively few restrictions on the types of properties they can purchase in India for residential or commercial use (excluding agricultural land). Some of the main property types NRIs are allowed to invest in include the following:

• Residential houses/apartments: This includes flats, villas, and independent houses for self-use or rental income. NRIs can purchase any number of residential units.
• Commercial property: This includes office spaces, shops, and warehouses that can be used for business purposes. Common commercial buying properties in India include retail outlets and office spaces in business districts. 
• Residential land for construction: NRIs can purchase vacant plots and land parcels to construct residential buildings like villas, farmhouses, etc.
• Farmhouses: NRIs can buy farmhouses and agricultural land for non-farming purposes like weekend retreats.
•  Luxury apartments: If their budget permits, NRIs look at buying high-end luxury flats in urban areas for capital appreciation and rental yields.

Documentation required for buying property in India
 

NRIs need to submit certain key documents for purchasing property in India.

• Passport and valid work permit/visa of the country of residence as address proof.
• Recent income tax returns and six months' pay slips as identity and income proof.
• Special Power of Attorney (PoA) is granted to a relative or agent in India to execute the property deal. The PoA needs to be notarised.
• No Objection Certificate from the society if the NRI is buying an apartment.
• Title deed papers, sale deed, and property registration documents from the seller.

Financing options via home loans
 

A major benefit for NRIs is being eligible for home loans in India to fund their property purchase. Key points around NRI home loans include:

• Loans are sanctioned in Indian Rupees and EMIs need to be repaid in the same currency.
• Interest rates are usually 1-2% higher than for resident Indians.
• Loan amounts sanctioned can be up to 75% of the property value with a maximum tenure of 20 years.
• NRI salary credits of at least 6 months in their Indian bank account or NRE/NRO balances can be shown as collateral.
• EMIs can be paid regularly through the NRE/NRO account or even through an overseas bank.\

IDFC FIRST Bank offers competitive interest rates on home loans along with a flexible tenure of up to 30 years. They provide higher eligibility for salaried and self-employed customers compared to other banks. The bank also has a fast online application process and digitized home loan servicing through their mobile app for a seamless customer experience.

Taxation aspects of NRI investments
 

NRIs need to pay all applicable taxes, duties, and registration charges during property purchases in India.

Stamp duty: Between 5-10% of agreement value, paid during registration.

Registration charges: Between 1-4% of property value. 

Service tax: 18% GST on under-construction property if bought off-plan.

NRIs earning rental income from their Indian property also need to pay income tax as per slabs and declare such incomes in their tax returns. The indexed cost of acquisition is considered while computing capital gains if the property is sold later. However, NRIs can avail tax deductions on interest and principal repayment of home loans under Section 24B of the Income Tax Act.

Property investments - A lucrative avenue for NRIs 
 

The Indian NRI real estate sector has grown by leaps and bounds over the last decade with infrastructure upgrades, policy reforms, and growing demand for housing and commercial spaces. This growth presents many advantages for NRIs looking at property as an investment asset.

• Capital appreciation: Property values generally increase in the long run in Indian cities, offering good returns on investments.
• Rental income: Buying income-generating assets allows NRIs to earn steady rent from leasing homes or workspaces.
• Tax benefits: Deductions on home loans and indexation benefits make NRI property investments more profitable.
• Strong fundamentals: India has a young population, rapid urbanisation, and nuclear families driving persistent demand for housing.
• Portfolio diversification: Real estate investment helps NRIs diversify their investment portfolio beyond just stocks and mutual funds.
• Hedging inflation: Real estate acts as an inflation hedge for NRIs and protects their wealth compared to other asset classes

Choosing the right property

When investing in a property from abroad, NRIs need to be careful in selecting the right investment opportunity. Taking an informed decision requires thorough research and due diligence of the available options. Location is one of the most crucial factors to consider. NRIs should target properties situated in well-developed areas that have adequate infrastructure. Prime residential and commercial localities tend to appreciate faster in value over the years.

The type of property being purchased also influences the returns. NRIs need to analyze historical price and rental trends of different property types like residential apartments, commercial spaces, or farmhouses. Properties that have consistently shown high and steady rental incomes, such as city apartments, make for a better investment decision. Similarly, the construction status holds importance - Ready-to-move in properties have lesser risks than under-construction assets. For ongoing projects, NRIs must assess the builder's track record and have clarity on project completion timelines.

Conclusion

Real estate continues to be an attractive and stable investment avenue for NRIs. Researching local markets, engaging reputed brokers, and assessing capital appreciation metrics make property buying a rewarding financial decision.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.