Purchasing Immovable Property in India, NRIs
All NRIs under the Indian law can buy property in India, subject to conditions. NRIs, unlike foreign nationals can acquire residential & commercial properties without restrictions, but they cannot purchase agricultural properties & plantations. They can acquire the property with the use of NRE/NRO and FCRA accounts & no prior permission of the RBI is required.
Tue Aug 23 2022 | Real Estate, Wills, Probate and Trust | Comments (0)
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Many Non-Resident Indians (NRIs) have often attempted to buy immovable property in their country of birth – India. The process for purchasing the property, including its payment and tax obligations, must be understood carefully before attempting this.
India’s burgeoning economy and booming real estate sector has made the purchase of immovable property extremely lucrative, even for NRIs. But what are the key elements that an NRI must be mindful of at the time of purchasing a property in India?
Who is an NRI?
As the term aptly suggests, an NRI is a person who is not a resident of India. In accordance with the Income Tax Act, a person is said to be a resident if:
- The person has resided in India in that year for 182 days or more; or
- Within 4 years preceding that year has been in India for 365 days or more; and
- Has been in India for 60 days or more in that year.
Exceptions to the residential status are:
- A citizen of India who leaves the country in any financial year for the purpose of employment.
- A citizen of India or a Person of Indian Origin (PIO), who beingoutside India, comes on a visit to India in any financial year.
Accounts held by NRIs
There are three types of accounts that may be maintained by NRIs. These are as follows:
NRE – Non Resident (External) Rupee Account
- Rupee denominated account.
- Principal and interest amount both can be moved from India to the foreign
country where the NRI is residing. - All NRIs can open NRE accounts.
- Individuals/entities from Bangladesh and Pakistan require prior permission from the Central Bank.
NRO – Non Resident (Ordinary) Rupee Account
- Rupee denominated account.
- Opened only for those seeking employment or establishing businesses overseas.
- Local funds that cannot be eligible for remittance abroad must be credited to an NRO account.
- Any person resident outside India can open this account, except Nepal & Bhutan residents.
- Individuals/entities from Bangladesh and Pakistan require prior permission from the Central Bank.
FCNR – Foreign Currency Non Resident (Bank) Account
- Foreign currency denominated account; it is a convertible account.
- Principal and interest amount both can bemoved from India to the foreign country where the NRI is residing.
- Individuals/entities from Bangladesh and Pakistan require prior permission from the Central Bank.
- All NRIs can open this account.
Purchase of immovable property by NRIs
The procedure for purchasing a property by an NRI in India is very similar to the process followed by resident Indians. The main difference is acquiring a power of attorney (PoA) if the NRI is not in the country so that the process can be followed-up in their absence in India.
No permission of the Central Bank is required for purchase of commercial or residential properties; these purchases can also be multiple. No document after the completion of transaction is required either.
Following are the basic steps for acquiring immovable property in India by an NRI:
- Engage with a local solicitor and notary.
- Arrange for a PoA if not present in India during purchase.
- Ensure your solicitor conducts a ‘due diligence’ check and agree on a sale agreement.
- Sign the sale deed by yourself or via your representative.
- Register the purchased property.
Documents required before purchasing property
Before attempting to purchase the property, the following documents must be handy:
- Passport/OCI Card: You should have an Indian passport. If you have a foreign passport, then you must have a PIO or Overseas Citizen of India (OCI) card available.
- PAN Card: Mandatory for property transactions.
- PoA: If unavailable in India, you will need a ‘special’ power of attorney to execute the transaction. This must be registered and notarized
Execution of PoA
- Since the PoA will permit your representative to complete the transaction on your behalf, it must be signed by you. This must be done in the presence of the consulate officer and/or notary in the country of residence from where the PoA is being executed.
- Attestation of the consulate is also required.
- Most locations also demand 2 witnesses while you sign the PoA.
Verification of essential papers
The following papers must be carefully verified before approval.
- Title deed in the seller’s name
- Approved plan
- Building permit
- Occupation certificate (if construction is complete)
- Older/necessary title deeds
- Share certificate (if it is a cooperative housing society)
- ‘No Objection Certificate’ (NOC)
- Real Estate Regulation Act (RERA) statutory registration
Documents for Registration
The following documents are essential for the registration process of the property:
- Identity proof
- Current address proof (electricity bill, phone bill etc.)
- Passport size photographs
- Sale deed
Payment for purchase of immovable property by NRI
- For purposes of payment, the NRI can either pay through banking channel by remittance from abroad or NRIs can use the balance in their NRE/NRO or FCNR accounts, which were explained above.
- Money can only travel through permissible channels. Hence, payment through traveler’s cheques or foreign currencies in India are prohibited.
- Purchase of properties can also be financed through legitimate home loans. Raising a home loan for NRIs has its own process. The loan may be granted either by the Indian employer of the NRI or through normal channels of housing finance companies and banks.
- Such property may also be acquired by way of gift or inheritance, requiring no payment, from any person who is a resident of India or an NRI or PIO. The property, however, must only be commercial or residential in nature.
Read More about how NRIs can acquire property in India by inheritance or gift.
CLICK HERE, To learn about how NRIs can transfer inherited property title in India.
Restrictions on purchase of property by NRIs
- Under the guidelines of the Central Bank, NRIs are free to purchase properties of commercial and residential nature. However, they are not allowed to purchase any agricultural land, farmhouse, or plantation property in India through any method.
- Proposals to acquire agricultural land, farmhouse, or plantation properties need specific approval of the Central Bank and permission is only granted after consultation with the Government of India.
- No person being a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan,
China, Iran, Nepal, or Bhutan shall acquire immovable property in India without prior permission of the Central Bank.
Conclusion
NRIs do not have to go through any extra process for purchasing an immovable property in India. The crucial element, however, is the execution of the PoA which will provide their representative with the power to execute the acquisition in their absence.
Most of the process is similar and permissions are required only for citizens from listed countries. The NRIs must ensure that they are in possession of crucial documents and have the ability to conduct a thorough due diligence, either themselves or by their representative. The process of acquiring property by NRIs in India is no longer complex.
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