NRI Investment in the Indian Residential Market

Tue, 07/26/2022 - 09:42

Author: JLL



The Indian real estate market is a booming sector and is one of the major attractions for investment, not only for Indians but also for non-resident Indians. NRIs from APAC, Europe, and particularly the Middle East have made significant investments in India. According to the recent forecast, the Indian real estate market is anticipated to grow by 12% from $13 billion to $15 billion in FY22. Therefore, any NRI investor planning to buy property in India from Dubai or any part of the world must be prompt to grab the opportunity and convert their hard-earned money into a lucrative investment.

To ensure the inflow of foreign investment to maintain the steady growth of the Indian real estate market, the Reserve Bank of India keeps releasing circulars from time to time on the NRI investment in India. However, one needs to know the rules and regulations to invest in India on NRI acquisition and purchase of an immovable property. Therefore, to eliminate all the negative thoughts and dilemmas, we are here to answer your questions right from - buying and selling property to home loans and their repayment - we will discuss it all! Let us get started!

Can NRIs buy properties in India?

Yes, a non-resident Indian can buy property in India by adhering to guidelines outlined by the Reserve Bank of India. According to the RBI regulations, a non-resident Indian can buy residential and commercial property in India without seeking special permission from the RBI or the government of India. However, purchasing agricultural land, farmhouses, and plantation property in India is prohibited for NRIs. However, an NRI can purchase, receive, or inherit property from an Indian resident.

Non-resident Indians who hold a passport in India; either of their parents or grandparents were citizens of India; or if an individual is married to an Indian citizen or PIO, they enjoy the liberty of buying property in India.

Who is a Person of Indian Origin (PIO)?

A foreign citizen (except a national of Pakistan, Afghanistan, Bangladesh, China, Iran, Bhutan, Sri Lanka, and Nepal) who at any time held an Indian passport or who either his/her parents/grandparents/great grandparents was born in India or in any state of India is known as a Person of Indian Origin.

Can a foreign national of Non-Indian origin buy property in India?

No, a foreign national of non-Indian origin cannot buy immovable property in India.

Can NRIs or PIOs jointly purchase property in India with Indian residents?

Yes. An NRI or PIO can jointly purchase the property with Indian residents.

Can NRIs avail of home loans in India?

Yes, an NRI can avail of a home loan in India based on age, qualification, income, overseas work experience, etc.

What kind of documentation is needed to apply for NRI Home Loans?

To avail of an NRI home loan in India, one must fulfill their bank's document requirements with an additional document such as submitting a copy of their passport, work contract, and power of attorney.

What is the mode of payment for NRI home loans?

The mode of payment for an NRI home loan could be through normal banking channels, a Non-resident Ordinary (NRO), Non-resident External (NRE), Non-Resident (Non-Repatriable) Rupee Account Scheme (NRNR), and Foreign Currency Non-Resident (FCNR) accounts. This may may change based on RBI regulations.

What is the maximum duration for repayment of an NRI home loan?

The NRIs usually repay the home loan in 5 years installments. However, several banks provide a decent repayment tenure that may last up to 30 years. The EMIs begin after the entire loan amount is disbursed, whereas, in the case of a part disbursement, NRIs are required to pay simple interest at the applicable rate on the amount disbursed.

Do non-resident Indians get tax benefits on buying properties in India?

No. Non-resident Indians do not get tax benefits on buying properties in India unless they file a return and become eligible to avail of the tax benefits.

What is the list of documents required for the registration process?

The list of documents required for the registration process is a Pan Card, Person of Indian Origin (PIO) or Overseas Citizen of India card (OCI), Passport, Passport size photograph, and address proof.

Can funds from the sale proceeds be remitted outside of India?

If the property was purchased from funds available in the NRE account, then the repatriation of sale proceeds is restricted to two, applicable only in the case of residential properties.

Additionally, the amount repatriated should be a maximum of the sum paid for the purchase of the immovable property in foreign currency received through traditional banking channels or from money kept in FCNR or NRE accounts.

Why is Power of Attorney required for an NRI Home Loan?

A Power of Attorney is a legal authority granted to an Indian resident by an NRI individual to conduct a transaction in India on his or her behalf.

Besides, IBEF reported that the Indian real estate market is anticipated to grow to US$ 1 trillion in size by 2030 from US$ 200 billion in 2021 and to account for 13% of GDP by 2025. Now is the time to invest in India and earn a high return on investment!