Real estate is a pillar of economic development in any economy. Rapid urbanization and India’s consistent economic growth make investing in properties in the country even more lucrative. But navigating legal, financial, and operational hurdles can be complex. This guide equips NRIs, PIOs, and eligible foreign spouses with practical, up-to-date information, ensuring informed and compliant property investment.

Who can buy property in India? 

Following are the categories of people who can buy property in India: 

1. NRI

2. Person of Indian Origin 

3. Foreign nationals married to NRIs and PIOs (own jointly)

Legal framework: RBI & FEMA guidelines

The Foreign Exchange Management Act (FEMA) and Reserve Bank of India guidelines govern who can buy immovable properties in India. 

General conditions on purchase 

• No prior permission from the RBI is necessary for NRIs and PIOs when purchasing residential and commercial properties in India. 

Agricultural land, plantation and farmhouse properties, however, may not be purchased but can only be inherited or received as a gift.

Conditions related to ownership

• NRIs and PIOs can individually own residential and commercial properties in India. There is no restriction on the number of properties they can own. 

• Foreign nationals married to NRIs, PIOs, or Indian nationals can only jointly own one property. 

Payment channels

All property payments must be made in INR via NRE, NRO, or FCNR accounts, or through direct remittance from abroad (foreign currency must be converted to INR first).

Funding your property purchase

Funds can originate from the following sources: 

• Direct inward remittance - transferring funds from their overseas bank accounts. 

• Non-resident External (NRE) accounts

• Non-resident Ordinary (NRO) accounts 

• Foreign Currency Non-resident (FCNR) accounts 

Pro Tip: Cash payments are prohibited; always maintain a documented banking trail for all property transactions.

NRI home loans: eligibility & required documents 

NRIs are eligible for the purchase of immovable properties in India through a home loan. 

• Banks usually require NRIs and PIOs to grant a Power of Attorney (PoA) to Indian citizens for application and documentation purposes. 

• A maximum of 85% of the property value can be financed through home loans, with a maximum loan tenure of 20 years. 

• Banks require proof of stable income and overseas work experience. 

NRI home loan eligibility criteria 

• Residential status - the applicant must be a non-residential Indian or a person of Indian origin. 

• Age - the minimum age of the applicant must be 21 years; the maximum age limit varies from 58 to 60 years.  

• Minimum income - It varies with size and tenure of the loan and the country of residence. 

• Source of income - Both salaried and self-employed are eligible for NRI home loan. For salaried employees minimum 2 to 3 years of continuous overseas work experience. For self-employed persons the same is 3 years of business continuity. 

• Co-application - Having a resident Indian as co-applicant is not mandatory.  

Required documents

• Duly filled home loan application form 

• PAN card 

• Identity proof - any one of—passport, aadhar card, driving license, govt-issued photo ID, etc.

• Address proof - any one of—aadhar card, driving license, electricity bill, govt-issued photo ID, etc. 

• DoB proof - passport, PAN card, aadhar with DoB, driving license, birth certificate or SSC marksheet 

• Income proof 

• Continuous overseas work experience (salaried) or business continuity proof (self-employed)

Transaction currencies

NRIs and PIOs can pay earnest money, down payment, and final sale consideration only in Indian currency. In the case of transferring funds from overseas bank accounts, the purchaser must convert the foreign currency to INR before making any payment to sellers or the sellers’ agents. 

TDS and taxation on property transactions 

Deducting TDS from the sales consideration is the buyer’s liability. Therefore, NRIs and PIOs purchasing property in India must be aware of the applicable rates. 

• While purchasing from an Indian citizen - The NRI buyer must deduct 1% of the total sales consideration as TDS for property value exceeding Rs 50 lakh. 

• While purchasing from an NRI or a PIO - The buyer must deduct TDS from the sales consideration. The effective TDS rate may vary depending on capital gains from the sales, holding period of the property, the seller’s income tax slab, and the low TDS certification.   

Applicable TDS rates become complex when purchasing property from NRIs and PIOs. If the seller is holding the property for less than 24 months, TDS will be the income tax rate applicable to the seller. 

For holding periods exceeding 24 months, applicable TDS rates are as follows: 

TAN Mandate: Buyers purchasing property from NRIs/PIOs must apply for and use a Tax Deduction Account Number (TAN) to deposit TDS with the government. PAN is not sufficient. This must be done before payment, and TDS must be deposited within the legal due dates; delayed deposits invite penalty.

Form 16A: After payment, provide Form 16A (TDS certificate) to the seller.

Repatriation of sale proceeds

Repatriation of sales proceeds from property investments depends on the source of funds. 

1. Purchases using funds in NRO accounts - Outward transfer up to a maximum USD 1 million per financial year. Gains from property sales are part of the yearly outward remittance limit. 

2. Purchased using NRE/FCNR accounts - Fully-repatriable as long as purchase and sales both transactions can be traced back to NRE/FCNR. 

Operational Protections: RERA Builder Checks and Title Due Diligence

• Always verify if the property and developer are registered with RERA via the state portal or emerging unified national RERA portal. Chronic delays, fraud, or developer mismanagement can be flagged on these platforms.

• Check the RERA registration number, review project details, and search for consumer complaints against the builder.

• Obtain an Encumbrance Certificate (EC) to ensure a clear title. Engage a legal adviser for due diligence across states.

Risks and challenges in NRI property investment

Despite the immense growth potential of investments in Indian real estate, NRIs and PIOs should be careful about possible risks and challenges. 

Some of the common risk and challenges are: 

• Vacancy risk of commercial and rental properties - Commercial properties in India offer attractive rental yields. However, prolonged vacancy may negatively impact effective rental yield. Frequent changes in tenants may require spending extra money on agents for securing regular rental income.  

• Disputed property titles - This is the most common challenge NRIs face while purchasing properties in India due lack of centralised and digitised ownership documentation.  

• Mortgaged or liened properties - Get Encumbrance Certificate (EC) on properties to be purchased. It helps track all registered transactions and financial liabilities associated with a property. 

• Builder or developer frauds - Construction delays, poor quality construction or delay in transferring titles are some of the examples. RERA-registered developers and properties are safer in this regard.  

• Risk of currency exchange fluctuations - If NRIs and PIOs are planning to transfer back gains from property investment to their country of residence, unfavorable currency exchange rate can lower effective gains. 

• Tax and compliance - Failure to obtain TAN or remit TDS properly results in heavy penalties for buyers. 

The Indian real estate sector is well-regulated and mature. As an investment destination, the sector is comparable to their counterparts in any developed country. However, it is crucial to conduct proper due diligence before making any purchase decision. Professional services are reliable for such support.