What NRIs Must Know About Purchasing Real Estate in India?

Though you have been outside India for years now and gained the status of ‘Non-Resident Indian’, a few of you would still have plans to get back to India and spend your retirement life here, recalling your childhood. As part of fulfilling this dream, you may want to invest in Indian real estate. 

Since the economy has hit the rock-bottom and most of the citizens are trying hard to lead a healthy life at this point, not many have bothered about real estate investments in India. Therefore, this might be the right time for you, NRIs, to invest in a property in India as the COVID-19 lockdown has pulled the real estate prices down to the bottom. The currency rates have also been favourable to make a move. 

To accomplish this, you must know more about the policies and regulations that are applicable.

  • No Permission Required: Non-resident Indians can purchase any immovable property in India, and such purchase does not require any special approval. 
  • No Restriction: There is no restriction on the number of immovable property an NRI can buy—residential or commercial property.
  • Payment Guidelines: The payment for such purchase must be made in Indian rupees. The funds for the purchase must be received in the country through normal banking channels and must be held in a non-resident account as per the Foreign Exchange Management Act (FEMA) and the Reserve Bank of India (RBI).

Also Read: Use of Technology Keeps Real Estate Industry Afloat During Lockdown

  • On Par with Residents: NRI investments are treated at par with resident Indians’ investments in the property market.
  • Restriction on Agriculture Land: NRIs are not permitted to purchase agricultural land or plantation property in India. If you insist on acquiring a farming land or plantation property through the purchase, you need to follow a particular procedure and seek permission from RBI through a lawyer before the purchase.
  • Tax Liabilities: If you are willing to sell the property after holding on to it for a while, remember that tax will be deducted at source. Long-term capital gains are taxed at 20.6%, and short-term gains are taxed at 30.6% as of 1 June 2020. However, you can claim a refund if you qualify for a lower tax slab when filing income tax returns.
  • Housing Loans: RBI has authorised banks and housing finance companies to provide loans to NRIs to purchase residential properties in India. Such loans will be processed and sanctioned in Indian Rupees and must be repaid in the same currency.
  • Loan Disbursement: Upon approval, the loan amount is regulated to be disbursed either to the seller’s or developer’s account and not to the loan seeker’s account. As of repayment, it can be transferred from the NRI’s NRO/NRE accounts or the FCNR deposits.
  • Power of Attorney: Since NRIs live outside India, they can appoint a friend or relative to complete the property purchase procedure.

Not just the desire to invest on a property in India, now you have the necessary basic knowledge about what you can purchase and how you can get the required permissions. So, plan your next step well!

For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in

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