NRI Property Purchase: Registration Process Made Simple

The Indian economy is the fastest-growing globally, and this economic boom has significantly impacted the real estate sector. Projections indicate it could reach a market size of $1 trillion by 2030. As a result, foreign buyers and NRIs are buying properties in India. 

Having lived abroad for many years, NRIs may find the legal procedures and protocols involved in buying real estate in India to be confusing and overwhelming. 

This guide will provide a comprehensive overview of everything needed for NRIs purchasing property in India. We will cover all relevant aspects, from who you can buy properties to the documents required and tax implications.

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Can NRIs Buy Property in India?

FEMA (Foreign Exchange Management Act) governs the eligibility of an NRI buying property in India. According to their guidelines, NRIs can buy or inherit residential and commercial properties in the country. Residential properties are buildings, houses, apartment complexes, and villas used for living purposes. Commercial properties are those utilized for business activities like stores, malls, restaurants, offices, and warehouses.

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FEMA prohibits Non-Resident Indians from purchasing or inheriting agricultural land, farmhouses, or plantations. 

Step-by-Step Process of Property Registration from Abroad

Step 1: Research and finalize a property 

In today’s digital era, finding, viewing, and researching listings from abroad has become increasingly simple. Websites and mobile applications like 99Builders, Magic Bricks, etc, offer NRIs the best option to find an ideal property in India.  

However, if you prefer a more old-school approach, you could award a trusted relative or acquaintance the Power of Attorney (POA). You can engage with a real estate consultant who can provide curated property options based on your preferences, help schedule virtual or physical site meetings and represent the buyer for discussions and initial paperwork.

Step 2: Legal due diligence and verification

Proper documentation and legal work are paramount while buying real estate. This includes everything that you give the sellers and vice versa. Do your due diligence and verify important information, such as title, ownership, encumbrances, and approvals from local authorities. 

Verify if the unit complies with RERA (Real Estate Regulatory Authority) guidelines. RERA promotes transparency and allows buyers to file complaints if sellers fail to meet their commitments. It provides the option to check the credibility of builders, the approvals and the status of projects online.

Step 3: Obtaining a Power of Attorney (POA)

You will need a notarized letter, attested by the Indian Embassy/Consulate and adjudicated in India. Templates available online, POA generators, and the Indian Embassy’s website make this process simple and easy. 

Furthermore, if you are working with a consultant, they can help you draft and ensure the paperwork is accurate. 

Step 4: Agreement to Sell and Sale Deed drafting

Next, sign an agreement to sell with the current owners, after which the sale deed is drafted. Check all the documents personally to ensure they are to standard and do not raise any red flags. 

Step 5: Registration process at the Sub-Registrar Office

The last step in the process is to register the final deed at the sub-registrar’s office. To complete this registration, you or the individual with the Power of Attorney (POA) must be present. 

Bring all necessary paperwork, including the completed deed, identification, and any other documents required for an NRI to buy property in India. The registrar will review the documents, register the deed, and you will receive a copy for your records. This registration is critical, as it legally formalizes the transaction and provides proof of ownership.

Documents Required for NRIs to Buy Property in India

Paperwork is a major component of any real estate transaction. Here is a list of documents required for an NRI to buy property in India.

• Passport and Visa: A valid passport and visa are needed to establish your citizenship and status as an NRI
• PAN Card: PAN card tracks financial transactions and tax filings, and you must provide it while making a property purchase. 
• OCI/PIO card: An Overseas Citizen of India (OCI) or Person of Indian Origin (PIO) card is necessary, if applicable. 
• Address proof: Proof of both your overseas and Indian residence, if you have one.
• Power of Attorney document: If you are granting someone the POA, a notarized letter is needed. 
• Bank account details: You must provide your bank details, preferably those of your NRE (Non-Resident External) or NRO (Non-Resident Ordinary) accounts. 

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Tax Implications for NRIs Buying Property in India

NRI buying property in India has tax implications; here are the main points to understand: 

TDS on property purchase

• Indian resident seller: 1% TDS on the total sale value for a property of₹50 lakh or more
• NRI seller: TDS is charged on the entire sale value; the base TDS rate is 20%.

Capital Gains Tax on the sale of property

• STCG: If the property is held for less than 2 years, it is taxed at 30% (plus surcharge and cess).
• LTCG: If held for 2 years or more, it is taxed at 20% with indexation benefits. 

Income Tax on Rental Income from Property

• A standard 30% deduction is allowed for maintenance
• Property taxes paid can be deducted from rental income.
• NRIs must file an income tax return (ITR) in India if rental income exceeds the basic exemption limit.

Tax Deductions Available – Section 80C

Section 80C allows a deduction of up to ₹1.5 lakh for:

• Principal repayment of a home loan
• Stamp duty and registration charges
• Life insurance premiums and ELSS (Equity-Linked Saving Scheme)
• PPF, if the account was opened when the individual was a resident of India.

Funding the Property Purchase

For NRIs looking to invest in property back home, understanding the funding process is essential. This guide highlights the critical steps and considerations for a smooth transaction.

Open a Foreign Currency Account

Establishing a foreign currency account, such as a NRE or NRO account, is pivotal. These accounts simplify the transfer of funds for real estate transactions, ensuring a seamless flow of money from overseas.

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Repatriation Rules and Limits

1. NRE Account:
   • Fully and freely repatriable; no limit.
   • Funds must originate from abroad, ie, foreign salary, investments.
   • Both principal and interest can be sent abroad.
2. NRO Account:
   • Limited to USD 1 million per financial year (April–March).
   • Covers income earned in India, like: Rent from properties, pension or dividends, etc.

Home Loans for NRIs

NRIs can also get home loans from various Indian banks. To qualify for a loan, the applicant must typically be between 21 and 60 years old at the time of loan maturity. They should be salaried or self-employed abroad, have 1-2 years of overseas work experience, and hold Indian citizenship. Credit scores significantly impact the likelihood of loan approval.

Types of Power of Attorney

There are 2 types of POAs – General and Specific. A general POA grants a person of your choosing broad power across different aspects, like managing properties, bank accounts, legal paperwork, etc. Specific POAs enable the person with power only to perform the acts specified in the document. 

Conclusion 

In conclusion, navigating the property market in India as an NRI is an opportunity filled with potential, provided you approach it with the right knowledge and support. By following the necessary steps, such as verifying property titles, obtaining a Power of Attorney, and understanding legal and tax obligations, you can make informed decisions that benefit your investment portfolio. 

Companies like 99 Realty India, with decades of expertise in the industry, make this journey easier by offering premium properties in thriving areas like Whitefield and Hebbal. Their user-friendly online tools empower NRIs to explore options, check availability, and conduct virtual site visits, all while ensuring compliance and a hassle-free experience. With the right guidance, your investment in Indian real estate can be not only rewarding but also a fulfilling step towards securing your financial future.

FAQs

Can an NRI buy property in India without visiting the country?

Yes, NRIs can buy property remotely by appointing a Power of Attorney and using digital tools for verification and communication.

What are the tax implications for NRIs buying property in India?

NRIs are subject to TDS, capital gains tax on sale, and income tax on rental income, with provisions for tax
deductions and DTAA benefits.

Is it mandatory for NRIs to have an NRE/NRO account to buy property in India?

Though not mandatory, it is highly advised that you route all transactions through NRE/NRO accounts for
transparency and compliance with FEMA regulations.