India’s real estate market continues to attract Non-Resident Indians (NRIs) seeking to invest in their homeland’s growing property sector. However, navigating the complex regulatory landscape requires careful planning and adherence to specific legal and financial requirements.
Let us now evaluate the comprehensive checklist to guide NRIs through their real estate investment journey.
Verifying Eligibility and Investment Routes
Before initiating any property transaction, NRIs must understand their eligibility under the Foreign Exchange Management Act (FEMA). Indian citizens living abroad, Persons of Indian Origin (PIOs), and Overseas Citizens of India (OCIs) can purchase residential and commercial properties, except agricultural land, farmhouses, and plantation properties. Investments can be made through two primary routes: the automatic route, which doesn’t require Reserve Bank of India (RBI) approval for amounts up to specified limits, and the approval route for higher investments.
Understanding eligibility, investment pathways, and tax benefits helps NRIs remain compliant, avoid legal complications, and optimize their returns.
Evaluating Long-Term ROI and Location Advantages
For NRIs, evaluating long-term ROI in Indian real estate means focusing on location advantages, infrastructure growth, rental yields, and upcoming developments, especially in metro cities like Mumbai, Delhi, Bangalore, Pune, and Gurugram. Factors such as connectivity, proximity to key amenities, and property management costs must be assessed, while professional services can ease tenant handling and compliance. With expert guidance on legal and financial aspects, NRIs can secure higher returns and reduce risks in India’s dynamic property market.
Choose A RERA Registered Project
RERA-registered projects ensure transparency, accountability, and buyer protection. The RERA registration confirms that the project meets regulatory norms. For NRIs, verifying this number and the developer’s track record on the state RERA site reduces risks of delays, disputes, and poor quality—making investments safer and more reliable.
Proper Documentation
Proper documentation is the backbone of NRI property investments. Essential requirements of one’s own documents include a passport, visa, PAN, address proof, income, and bank statements.
NRIs must check and verify property documents, including verified title deeds, project license, building plans & layout approvals, and environmental compliance approvals to ensure transparency and security.
Engaging a legal advisor for title verification further safeguards the process, while appointing a Power of Attorney can simplify registration in cases where physical presence is not possible, making the investment smoother and more secure.
Taxation, Exemptions, Benefits & Liabilities
- Long-Term Capital Gains – If a property is held for more than 24 months, gains are taxed at 12.5% (post 23-07-2024) with indexation benefits removed.
- Short-Term Capital Gains-If sold within 24 months, gains are taxed as per the individual’s income tax slab.
Section 54 – Exemption on reinvesting long-term gains from the sale of a house into another residential property in India (up to ₹10 crores).
Section 54EC – Exemption by investing up to ₹50 lakhs in specified NHAI/REC bonds within six months, with a 5-year lock-in.
Section 54F – Exemption on gains from the sale of any capital asset (other than a house) if the entire proceeds are invested in one residential property in India.
TDS under Section 195 applies on sales and rental income. NRIs can also claim deductions under Section 80C (loan principal) and Section 24 (interest), while DTAA helps avoid double taxation.
Insurance and Safety Nets
For NRIs, insurance provides a safety net—property insurance covers risks like fire or theft, title insurance safeguards ownership, and loan/life covers ensure EMIs are paid in unforeseen events, protecting both assets and family.
Financing and Home Loans
Most Indian banks offer NRI home loans covering 75–80% of property value, subject to income, job stability, and debt-to-income criteria. Loan rates are usually 0.25–0.50% higher than those for residents, making it vital to compare lenders.
Maintaining an NRE or NRO account simplifies loan disbursal and EMI payments, while some banks also consider foreign income documents for approval, easing access to financing.
Currency and Forex Risk
Currency fluctuations directly impact NRI property returns—while a weaker rupee can increase gains on repatriation, a stronger rupee may reduce overall value. Since rentals, loan EMIs, and sale proceeds often involve conversion, NRIs should plan through NRE/NRO accounts, track forex trends, and consider hedging options to minimize risk.
Repatriation of Sale Proceeds by NRI
For NRIs and PIOs, repatriation of sale proceeds from immovable property in India (other than agricultural land, farmhouses, or plantations) is permitted under FEMA regulations, provided the property was acquired legally. The repatriated amount cannot exceed the original purchase value paid in foreign exchange or through an NRE/FCNR account, and in the case of residential assets, proceeds can be repatriated for only two properties. Where property was purchased using Rupee funds, repatriation is allowed up to USD 1 million per financial year from an NRO account, subject to an undertaking and a Chartered Accountant’s certificate as prescribed by the CBDT.
Authored By: Dr. Vishesh Rawat, VP & Head of Marketing, Sales & CRM, M2K Group
