Are foreign nationals of Indian origin allowed to buy immovable property in India?

A person of Indian origin (PIO) who can claim to have Indian lineage doesn’t require any special permission to buy property in India. However, there is a clause inserted by the Foreign Exchange Management Act (FEMA) in 1999 which stipulates that a foreign national of Indian origin cannot purchase agricultural land or invest in a farmhouse or plantation in India. Such properties are limited to resident Indians only.

Payment for real estate investments should also be done in Indian rupees, with funds transferred to India through legal banking channels.

How can foreign nationals of Indian origin make payments for purchasing immovable property in India under the general permission act?

Foreign nationals of Indian origin who have held Indian passports in the past or who can claim Indian lineage are known as PIOs and are covered under the general permission act to buy property in India – without filing for permission from the RBI.

However, the payment for the same needs to be done through funds transferred to India through normal banking channels or via funds held in NRE/FCNR(B) accounts. Alternatively, payment can be done through NRO accounts maintained in India. Payments cannot be made from outside India, through foreign currency or through travelers’ cheques.

Can non-resident Indians living abroad buy property through an agent or through power of attorney?

Non-resident Indians (NRIs) who aren’t physically present in India can still be able to buy property in India through the help of a power of attorney or agent, who can make the transactions on their behalf. Based on mutual trust and understanding, an agreement can be made between an NRI and their relative or lawyer/agent to execute the purchasing formalities of the said property through Power of Attorney executed on behalf of the NRI.

The Power of Attorney formalities should be executed on stamp paper in front of the relevant authorities.

Do Indian nationals residing abroad require permission from the RBI for buying immovable property in India?

There is no specific permission required by non-resident Indians residing abroad from the Reserve Bank of India (RBI) when making real estate investments within India. This is because the RBI has given general permission to non-resident Indians for investing in residential and commercial properties.

However, there is a clause set up by the Foreign Exchange Management Act (FEMA) in 1999 and executed in June 2000 that prevents non-resident Indians from investing in agricultural land, farmhouse or plantation properties in India.

What are the procedures to be completed by foreign nationals of Indian origin for buying immovable property in India?

A foreign national of Indian origin is also referred to as a person of Indian origin or a PIO. These are people living abroad who have once held an Indian passport or have relatives of Indian origin. Buying immovable property in India is regulated by the Foreign Exchange Management Act, 1999, and entails that non-resident Indians and PIOs cannot buy property in India that is agricultural land, plantation or farmhouse. PIOs will need to file a declaration form IPI 7 with the central office of the RBI within 90 days of purchase of immovable property.

Can NRIs avail loans for buying property from financial houses in India?

Non-resident Indians or NRIs who hold Indian passports, are also eligible for availing of NRI loans in rupees up to one crore when buying property – just like any other resident Indian. However, there are slight differences when it comes to repayment of EMIs. Monthly remittances have to be made in rupees from an NRO, NRE or FCNR account. The money remitted to these accounts should also be done through legal banking channels.

Most banks ask for a resident co-applicant or an NRI guarantor who will need to provide identity, address, and income proofs.

Can the rental income from non-movable property be remitted outside India?

Income earned as rent on real estate investments by Non-resident Indians (NRIs) will need to be deposited in Ordinary non-resident rupee (NRO) accounts. While FEMA allows rent income to be deposited in NRE accounts, banks prefer it’s being deposited in NRO accounts only. And as long as the income is earned in India, it will become taxable in accordance with Indian laws too.

To repatriate this rental income abroad, it will have to be first transferred from an NRO account to an NRE account before becoming eligible to remit abroad.

Can a non-resident Indian repatriate the proceeds of sale of immovable property from India?

Repatriation of proceeds of sales to a country outside India is possible, provided certain clauses are fulfilled. According to the Reserve Bank of India (RBI), the sales proceeds to be repatriated should not exceed the foreign currency brought into the country for the property’s initial purchase. Proceeds can be repatriated through an NRE account.

The RBI has further made repatriation easier for non-resident and PIOs by removing the lock-in period for retaining the real estate investment before its sale. However, only the proceeds of two residential properties can be repatriated abroad.

How many residential or commercial properties can an NRI or PIO purchase under general permission?

A person of Indian origin (PIO) or a non-resident Indian (NRI) can make any number of real estate investments under the general permission act as there are no limits on the number of properties that can be purchased by NRIs or PIOs.

However, these properties have to be paid for by foreign funds transferred into the country through legal banking channels. Funds maintained in non-resident accounts in accordance with the provisions and regulations of the RBI and the FEMA Act, 1999 can be used to buy property in India.

Are there any tax benefits for NRIs investing in non-movable properties in India?

As far as tax implications for buying property in India by non-resident Indians goes, he is as entitled to tax benefits as a resident Indian is. An NRI can claim deductions of up to Rs.1.5 Lakh under section 80C. Property purchased through NRI loans has further advantages as tax claims on the interest rates on the loan have no upper ceiling for NRIs. A flat 30% tax claims on any rent income can also be made in lieu of maintenance. And if the real estate investment is left vacant, there is further wealth tax exemption.