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Guide for NRI buying property in India

Who is considered as an NRI?

Under the Foreign Exchange Regulation Act of 1973, individuals are considered as Non-Resident Indians (NRIs) if they meet either of the below conditions:

  • Indian citizens who stay abroad for employment or carrying on business or vocation outside India or for any other purpose in circumstances indicating an indefinite period of stay abroad;
  • Government servants who are posted abroad on duty with the Indian missions and similar other agencies set up abroad by the Government of India where the officials draw their salaries out of Government resources;
  • Government servants deputed abroad on assignments with foreign Governments or regional/international agencies like the World Bank, International Monetary Fund (IMF), World Health Organisation (WHO), Economic and Social Commission for Asia and the Pacific (ESCAP)
  • Officials of the State Government and Public Sector Undertakings deputed abroad on temporary assignments or posted to their branches or offices abroad.

Who is a PIO or foreign citizen of Indian origin?

A PIO (Person of Indian Origin) or foreign citizen is deemed to be of Indian origin if:

  • he/ she at any time held an Indian passport; OR
  • he/ she or either of his/ her parents or either any of his/ her grandparents was a citizen of India; OR
  • he/ she is a spouse of an Indian citizen or (a) or (b) above.

Do NRIs require the consent of RBI to buy property in India?

No, NRI’s do not require permission to buy any immovable property in India other than agricultural/plantation property or a farmhouse.

Is there any limit on the number of housing properties that may be purchased by an NRI?

There are no limits on the number of residential properties that may be bought by an NRI. However, repatriation (the process of converting a foreign currency into the currency of one’s own country) is allowed only in respect of two such properties.

What is the checklist for buying a residential property?

Keep in mind the following things while buying a residential property such as apartment flats and villas:

  • Check if the properties and builders are RERA verified.
  • Check for approved layout plan and approved building plan with number of floors. Check Carpet area vs Saleable area to ensure you are not misled on the size of the property
  • Ask for photocopies of the all deeds of title related to the property to be purchased. Examine the deeds to establish the ownership of the property by seller, preferably through an advocate. Ascertain the survey number, village and registration district of the property as these details are required for registration of the sale. Previous encumbrances and loans, if any on the property must be cleared before completion of purchase of the property. The title of the Vendor to the property must be clear and marketable.
  • Clearance from municipality, electricity, water, pollution and lift authorities
  • Check the building bye-laws in that area to verify any issue with setback, side setback, height, etc.
  • Confirm transfer fees, stamp duty and registration charges to be paid on purchase of the property as well as outgoings to be paid for the property, i.e., property tax, water and electricity charges, society charges and maintenance charges
  • Cost components: price, stamp duty, registration charges, transfer fees, monthly outgoings and society charges, costs of utilities 

Can a home/land be sold without the permission of Reserve Bank?

Yes, the Reserve Bank has granted general permission for sale of property. However, where another foreign citizen of Indian origin purchases the property, funds towards the purchase consideration should either be remitted to India or paid out of balances in non-resident accounts maintained with banks in India.

Can sale proceeds of such property if and when sold be remitted out of India?

In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by a NRI or PIO, the authorized dealer may allow repatriation of the sale proceeds outside India, provided all the following conditions are satisfied:

The immovable property was acquired by the seller in accordance with the provisions of the Exchange Control Rules/Regulations/Law in force at the time of acquisition, or the provisions of the Regulations framed under the Foreign Exchange Management Act, 1999; 

NRIs/PIOs can effect remittance of sale proceeds of immovable property in India irrespective of the period for which the property was held. The sale proceeds allowed to be repatriated should, however, not exceed the foreign exchange brought in to acquire the said property. 

In case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties, if the property was purchased from funds held in NRE Account.

The amount sought to be repatriated abroad should not exceed the amount paid for acquisition of the immovable property in the foreign exchange received through normal banking channels or out of funds held in FCNR or NRE Account. In case of investment out of NRE Account the amount to be calculated as foreign currency is equivalent value as on the date of payment for acquisition of the said property.Loan

Can NRIs get Home Loan for buying a property in India?

Yes, NRI can get Home Loan for buying residential and commercial properties in India. Read our blog on NRI Home Loan with details on current interest rates, eligibility and documents required

Does RBI have any guidelines for loans to NRIs/PIOs?

There are guidelines issued by the Reserve Bank of India for grant of housing loans to NRIs. The guidelines are:

  • The loan amount shall not exceed 85% of the cost of the housing unit. 
  • Own contribution, which is the cost of housing unit financed less the loan amount, can be met from direct remittances from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.
  • Reimbursement of the loan, comprising of the principal and interest including all the charges are to be remitted from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.

Can authorized dealers grant loans to NRIs for purchase of a flat/house for residential intention?

Authorized dealers have been granted permission to grant loans to NRIs for acquisition of house/flat for self-occupation on their return to India subject to certain conditions. Repayment of the loan should be made within a period not exceeding 15 years out of inward remittance through banking channels or out of funds held in the investors’ NRE/FCNR/NRO accounts.

Can my family or friends repay my home loan?

Ans.: Yes. Such housing loans availed in rupees can also be repaid by the close relatives in India of the borrower.

Can an NRI take loan against the security of immovable property in India?

An NRI can borrow against the security of immovable property from an authorized dealer subject to following conditions:

  • the loan should be used for meeting the personal requirements or for borrower’s own business purposes; and
  • Loan should not be used for forbidden activities, namely;
    • business of chit fund, or
    • agriculture or plantation activities or in real estate business, or construction of farm houses, or 
    • trading in Transferable Development Rights (TDRs)
  • The loan amount cannot be remitted outside India,
  • Repayment of loan shall be made from out of remittances from overseas or by debit to NRE/FCNR/NRO account or out of the sale profits of shares or securities or immovable property against which such loan was granted.

What are the benefits of Investing in Real Estate in India?

The relaxation of FDI in the construction development sector announced in March 2006 allows NRIs, PIOs and all foreigners equal opportunity with their Indian counterparts in the Indian real estate sector. The new guidelines state that before selling, the site has to be developed, constructed upon or fulfill the criteria of a minimum of one year of development.

  • NRIs, PIOs and foreigners can now invest in land, buy it, construct upon it or develop it, sell constructed buildings/developed plots
  • FDI through automatic route can also flow in not just for the housing sector, but also for townships, housing, commercial area, and infrastructure development
  • Restrictions on minimum area of land, minimum number of units has been removed
  • Minimum constructed area required is 50, designated area is 25 acres

How is the sanctioning authority and monitoring authority different in India?

In some states, the Municipal authority is the ultimate monitoring authority. In smaller states and in non-urban areas, the town and country planning corporation acts as the monitoring authority. In urban areas where most of the construction takes place, the municipal authority wields power in giving the final permission and sanctioning drawings and plans. Clearances on electricity, water supply and other utilities also come from here.

The new FDI norms state that the minimum investment has to be USD 5 million for 51% shareholding. Does this include funding of subsidiaries as well?

If you have a wholly owned subsidiary by a foreign company then the minimum capitalization norm is USD 10 million.

If you have a joint venture, the ratio 74:26 or 51:49 is immaterial. For a joint venture, the minimum capitalization is USD 5 million in foreign exchange.

This minimum amount of foreign exchange is required to arrive within six months from the date of commencement of business. The six months can be used to bring that money into India.

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