Can NRI Buy Property In India?

Can NRI Buy Property In India?

Yes, an NRI / OCI can buy properties in India. The purchase and sale of immovable assets in India by non-resident Indians (NRIs) is under the purview of the Foreign Exchange Management Act (FEMA) and is administered by the Reserve Bank of India (RBI). An NRI is an Indian citizen who is a resident outside India, according to FEMA. An OCI (overseas citizen of India) is a Non-Indian citizen who or whose parents or grandparents were born in India. NRIs & OCIs are treated the same for investment in real estate. Therefore we will address them as NRIs going forward.

Should an NRI Buy Property In India?

All NRIs know that India is one of the fastest-growing economies in the world. Its Real Estate Sector contributes around 10% to the country’s GDP. With the Indian government looking to spend billions of dollars more on developing infrastructure, the growth of the Indian Real Estate Sector is not stopping. Investment in the real estate sector is one of the safest options for investment for an NRI in India.

However, a shift is being seen in NRI investments in India. The NRIs now prefer investment in financial assets to physical assets. We at Ashutosh Financial Services also believe that an NRI should prefer investing in Finance Assets over Physical Assets to get the maximum returns on their investments. Below are the reasons why an NRI should choose Financial Assets (Mutual Funds, Portfolio Management Services, Fixed Deposits, etc.) Over Physical Assets (Land, Residential Property, Commercial Property): 

  1. Liquidity: Physical assets like land, residential or commercial property are generally considered ill-liquid assets. On the other hand, financial assets like mutual funds, portfolio management services, and fixed deposits are easily sellable at the click of a button. Another key difference is that to sell land; an NRI must find a buyer, agree to a specific price and then recieve the sale proceeds. On the other hand, in financial assets like mutual funds or fixed deposits, an NRI can receive the entire funds back in their bank account in a week. Further, there is also a lot of unaccounted money involved in transacting in real estate which can become cumbersome for an NRI to manage.
  2. Returns: Everyone knows that the long-term returns of financial instruments like mutual funds and portfolio management services will outperform the returns of physical assets like land, residential property, commercial property, etc. The case of India is no different in this regard. The returns of Indian financial assets have consistently beaten the returns of physical assets over the last three decades.
  3. Management of Assets: Physical assets demand resources for management, upkeep, and security to maintain an asset properly. On the other hand, modern financial assets are professionally managed and require no time or resource devotion from you. Managing physical assets is time and money-consuming, whereas financial assets do not need either. 
  4. Correlation To Economic Growth: The Returns of physical assets decreases when the economy grows. It happens because when the economy grows, infrastructure grows too, and people tend to live in distant locations with the growth of infrastructure. Distant locations are areas that are away from the center of the city. As people shift to distant locations, there is a significant increase in the supply of real estate, which reduces the returns on a real estate investment. However, the returns of financial assets are in line with economic growth. The returns from financial assets rise with broader economic growth. The higher the economic growth, the higher the returns from the financial assets.
  5. Next Generation: The next generation NRIs are not intending to relocate to India or visit India frequently. Moreover, since NRIs do not intend to use the property, it does not make much sense for them to own real estate assets. Moreover, visiting India to manage the assets can also be a challenging task for them. 

Types of Properties an NRI can buy in India:

NRIs can buy property in India as long as they comply with the FEMA and RBI guidelines. There are no restrictions on the number of properties an NRI can buy in India. There are various types of properties that an NRI can buy in India. An NRI can buy any residential or commercial property in India. However, an NRI cannot purchase any agricultural land, farmhouse, or plantation property in India. 
The RBI releases various directives from time to time on the properties an NRI can buy in India. These directives help the NRIs abide by the laws while buying properties in India. .As per the directives, NRIs cannot engage in real estate business in India, i.e. dealing in regular buying and selling of land within short intervals in greater volumes. It is important to note that an NRI need not disclose to the RBI all the properties they purchased in India. in India. These directives help the NRIs abide by the laws while buying properties in India. .As per the directives, NRIs cannot engage in real estate business in India, i.e. dealing in regular buying and selling of land within short intervals in greater volumes. It is important to note that an NRI need not disclose to the RBI all the properties they purchased in India.

How Can an NRI Buy & Sell Properties In India?

An NRI can buy residential and commercial properties in India without any restrictions. NRIs can pay either through standard banking channels by remittance from a foreign bank account or use their NRE/NRO account balances. NRIs cannot pay for properties using traveller’s cheques or foreign currency in India. Many NRIs are investing in the Indian property markets due to the depreciating rupee. A depreciating rupee would enable the NRIs to generate abnormal returns due to exchange rate fluctuations.

It is advisable for NRIs to buy properties in India either through remittances from abroad or through an NRE account. This would enable an NRI to easily repatriate the sale proceeds of the property outside India after paying appropriate taxes. However, in the case of residential house properties, the repatriation of funds is restricted to the sale of a maximum of two properties. Repatriation beyond that will have to be done under the 1 million US dollar repatriation scheme of RBI.

Documents Needed By The NRIs To Buy Property In India:

An NRI can buy property in India by using the following documents: 

  1. Passport or OCI Card
  2. Pan Card
  3. Power Of Attorney (In case the NRI is unable to come to India to complete the purchase)
  4. Utility Bills (For proof of current residence) 
  5. Passport Size Photo. 

Can an NRI Buy Property In India Without Coming To India?

Yes, an NRI can buy property in India without coming to India through a Power Of Attorney (POA). An NRI can give their friends or relatives a POA to complete the purchasing process in India. An NRI can create a custom POA to give specific rights to the representative buying property on their behalf. A POA would ensure that an NRI can buy a property in India without coming to India. 

How Can We Help You?

At Ashutosh Financial Services Private Limited, we have assisted the NRIs with their real estate requirements for over 20 years. We also support the NRIs in relevant tax compliance and procedural compliance relating to property buying in India. Our team specializes in creating Power Of Attorney (POA) for NRIs. 
We thoroughly discuss with the NRIs their requirements for buying property in India. After this, we inform the NRIs regarding the procedures and compliance they must adhere to. We also discuss with NRIs how they should route their funds and which bank accounts they should use to get the maximum benefit. Our team would additionally suggest the NRIs various ways in which they can save tax while buying property in India. 
We also help the NRIs draft a Power Of Attorney (POA). Our team would discuss with the NRIs the power they wish to give their representative. Our team also helps the NRIs in both drafting and notarizing the POA. We will also assist the NRIs in drafting the POA, keeping in mind their objectives.
Apart from providing the above-mentioned financial services to the NRIs, we also offer NRI Banking, NRI Investment, NRI Insurance, NRI Income Tax & Foreign Tax Compliance Services. We are a one-stop professional financial services provider company. We aim to provide the NRIs with quality financial services for all their Investment needs.
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