Rules of investment

Whether India’s realty market is buoyant or not, most non-resident Indians (NRIs) look out for real estate investment avenues within the country as owning property in one’s homeland gives a strong sense of security.  Moreover, the current depreciation of the Indian rupee has made realty assets more affordable for overseas investors.

Attractive returns and favourable government reforms and schemes have further encouraged NRIs to invest in Indian real estate. The Reserve Bank of India’s (RBI) rules have also become simpler, allowing non-residents with Indian passports and people of Indian origin (PIO) to invest in the country without prior permission from authorities, making the task convenient and  faster for overseas investors.

The following are key aspects to watch out for when NRIs conduct property transactions in India.

Type of property

The regulations for nonresident investments fall under the Foreign Exchange Management Act (Fema), which states that an NRI or PIO can freely purchase both residential and commercial property in India, with no restriction on the number of units. However, purchase of any agricultural land, farmhouse or plantation property is not permitted, although these can be inherited.

Property payment

The government of India has provided special privileges to NRIs in foreign exchange and property investment, says A.R. Gupta, Senior Advocate at A.R. Gupta & Associates. “NRIs can maintain bank accounts in India and they also  have a choice of maintaining their bank accounts in foreign currency as well,” he says.

An NRI can pay for property purchased in India through inward remittances or funds held in a non-resident account maintained in accordance with the  provisions of Fema and RBI regulations, says Gupta.

Title deed

The buyer should check the land title to ensure the land is clean, marketable and free of all encumbrances, says Umesh Jaandiyal, Head of Sales — GCC Markets at Omkar Realtors & Developers. “If a developer is building on a piece of land under a development agreement, then it must have irrevocable power of attorney from the landowner. Along with a land title, the purchaser should also demand a search report of the ownership of the land for the past 30 years,” explains Jaandiyal.

Moreover, Nishanth Mandody, Sales and Marketing Head of Legend International Real Estate, advises buyers to ensure that the land is not for agricultural use, as any kind of construction is not permitted on agricultural land. Mandody adds, “If it is an apartment being constructed by a developer, the buyer must look at the building permission number, clearance certificate, Commencement Certificate from government authorities and Intimation of Disapproval, which is an essential permission given to the developer by municipal authorities to redevelop an old building.”


Registering the property is essential to confirm the buyer’s legal ownership of the unit purchased. Rajnish Oswal, Managing Director of Smart Planners Group, says, “If all titles are clear, then the builder can do property registration for the buyer and the purchaser should insist on immediate registration at the time of buying.” However, registration rules change between states, with many states registering the property at the time of possession. Hence, in such a case, should at least get the documents notarised, says Oswal.


Several authorised financial institutions offer a variety of loan products to NRIs for buying property, house construction and more. Based on a buyer’s eligibility, the maximum loan amount is 80 per cent of the total value.

The remaining 20 per cent should come from the buyer’s own funds.  However, before applying for a loan, the buyer, with the help of an agent or lawyer, should ensure that all documents are ready for loan approval.  Jaandiyal says requirements for an NRI loan include copies of the passport, visa, Emirates ID and PAN card, salary certificate and six-month bank  statement for salaried NRIs.

For businessmen, additional requirements are a two-year audited financial statement, memorandum of association, article of association, trade licence, statement of current account and income tax return for the past three years. Before actual purchase of the property, Jaandiyal advises buyers to take a home loan sanction stating the loanable amount, which will enable them to plan the investment correctly. For repayment, Jaandiyal says a buyer can either give a standing instruction to the bank to automatically debit the amount from the nonresident external account every month, transfer  payments online or issue postdated cheques to the bank.

Sale of property

There is no restriction on NRIs when selling property. However, there is a property tax on the total profit earned from the sale of the property, says Oswal. “If the property is sold after three years from the date of purchase, a long-term capital gain tax of 20 per cent tax deducted at source [TDS] is applicable, wherein gain is the difference between sale value and indexed cost of purchase [cost of purchase adjusted to inflation],” he says.

“If the property is sold before three years have elapsed, then a short-term capital gains tax of 30 per cent TDS is incurred, i.e. the difference between the sale value and cost of purchase [without the indexation benefit]. The buyer can also get a tax exemption if planning to reinvest the capital gains in another property within a span of up to two years, or in bonds within six months.”

Repatriation of proceeds

If the buyer needs to repatriate the sale proceeds, the limits and conditions for repatriation will vary based on the funds used for buying property.

“The principal amount representing purchase price of the commercial or industrial property can be freely repatriated, but in case of residential property only sale proceeds of a maximum two properties are allowed. [In a financial year] $1 million [Dh3.67 million] can be repatriated without any issues,” says Jaandiyal.

Source: Hina Navin, Special to PW


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