This is a three part series, wherein our experts answer all NRI questions related to buying property in India.
Whenever an NRI or PIO plans to buy a new home or any property in a foreign country, they tend to seek clarity in certain areas. These questions will answer all the common customer queries about owning and buying a property in India. Refer this NRI guide sectioned into legal, home loan and tax categories, to accustom yourself with laws, rules and important information on the Indian real estate sector.
Legal FAQs
Q1. Why to invest in property in India?
Ans: To tap the potential of Indian real estate market and expedite the sector with a double digit growth rate, the developers have shifted their focus to offer timely possession of projects and adapt to the new FDI rules.
The economic contribution of the real estate sector is most likely to increase significantly during the period, from 6.3% in 2013 to almost 13% in 2025. This spiral growth is attributed to the intensive demand for first-rated projects that can be delivered on time.
During H1 2014, prices in Bangalore have appreciated at the fastest pace of 11%, compared to H1 2013. Mumbai, currently suffering a downfall of 49% is expected to recover the sales volume by the end of FY 2014. As real estate demand in India improves, capital values in other major cities are also likely to increase, albeit marginally.
Purchasing a property in India, thus, stands as a top priority for a non-resident Indian (NRI). The purchase transaction is governed by the Reserve Bank of India (RBI) and the rules and regulations that fall under the purview of the Foreign Exchange Management Act (FEMA).
Q2. Who is an NRI?
Ans: Non Resident Indian (NRI) is a citizen of India, who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Non-resident foreign citizens of Indian Origin are treated at par with Non Resident Indian (NRIs).
Q3. Who is a PIO?
Ans: Person of Indian Origin (PIO) (NOT being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who
(a) At any time, held Indian passport, or
(b) Who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
Q4. Can an NRI/PIO purchase immovable property in India?
Ans: Under the general permission granted by RBI, the following categories can freely purchase immovable property in India:
(a) Non-resident Indian (NRI) - that is a citizen of India residing outside India
(b) Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who:
(i) At any time, held an Indian passport or
(ii) Who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land/plantation property/farm house in India. OCI can purchase immovable property in India except agricultural land/plantation property/farmhouse.
Q5. Can an NRI/PIO acquire agricultural land/plantation property/farm house in India?
Ans: It requires specific approval of Reserve Bank of India and the proposals are considered in consultation with the Government of India.
Q6. What is the Tax treatment for income generated from property selling or renting for NRI/ PIO/OCI?
Ans: The mere acquisition of property does not attract income tax. However, any income accruing from the ownership of it, in the form of rent (if it is let out)/annual value of the house (it is not let out and it is not the only residential property owned by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part thereof is taxable in the hands of the owner.
Q7. Is there any restriction upon the number of properties bought by NRI/PIO/OCI?
Ans: There is no restriction on the number of properties that can be bought.
Q8. Is there any specific way of payment for buying / acquisition of immovable property by NRI/PIO should be made out of?
Ans: There are multiple ways as mentioned below:
(a) Funds received in India through normal banking channels by way of inward remittance from any place outside India
(b) Funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank
(c) No payment of the purchase price for acquisition of immovable property shall be made either by traveler’s cheque or by foreign currency notes or by other mode other than those specifically permitted as above
Q9. What are the key points to be considered at the time of purchase?
Ans: Investment in real estate is a simple but long-term move so, one should be cautious enough at the time of purchase to secure the deal.
Few points of consideration are mentioned below:
(a) Property Title: The title of property should be clear from the issues and the seller should have the required right to sell it, especially if it is inherited or any joint property.
(b) NDC: Always check that there will be no outstanding electricity/water bills or any other authority dues pending with the property. Take a no dues certificate from the seller at the time of purchase
(c) Bank release letter: It is advisable to take the bank release letter from the concerned bank, if the property had been mortgaged as security in any type of loan
(d) Permits: The property for sale should have all approvals and permits from the civic authorities in terms of construction
Q10. What are the key points that ensure a safe deal to buy a property in India?
Ans: Below are the key safety measures to be considered while buying a property:
(a) Whenever you plan to invest in real estate, you should go through the proper channels, either through a Reliable Broking Firm, friend or relative to ensure the authenticity of the property
(b) You can also approach through property expos and seminars to choose a right property and select reputed developer
(c) It will be wise to get the title papers of the property verified by a lawyer before going ahead
If and when you want to purchase /dispose the property, you can give Power of Attorney to a reliable person who is resident in India & who may be able to act on your behalf to complete formalities such as registration, possession, execution of the agreement of sale, etc.
Read Other FAQ's: Tax NRI FAQ's , Home Loan FAQ'sLegal FAQs
Q1. Why to invest in property in India?
Ans: To tap the potential of Indian real estate market and expedite the sector with a double digit growth rate, the developers have shifted their focus to offer timely possession of projects and adapt to the new FDI rules.
The economic contribution of the real estate sector is most likely to increase significantly during the period, from 6.3% in 2013 to almost 13% in 2025. This spiral growth is attributed to the intensive demand for first-rated projects that can be delivered on time.
During H1 2014, prices in Bangalore have appreciated at the fastest pace of 11%, compared to H1 2013. Mumbai, currently suffering a downfall of 49% is expected to recover the sales volume by the end of FY 2014. As real estate demand in India improves, capital values in other major cities are also likely to increase, albeit marginally.Purchasing a property in India, thus, stands as a top priority for a non-resident Indian (NRI). The purchase transaction is governed by the Reserve Bank of India (RBI) and the rules and regulations that fall under the purview of the Foreign Exchange Management Act (FEMA).
Q2. Who is an NRI?
Ans: Non Resident Indian (NRI) is a citizen of India, who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. Non-resident foreign citizens of Indian Origin are treated at par with Non Resident Indian (NRIs).
Q3. Who is a PIO?
Ans: Person of Indian Origin (PIO) (NOT being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who
(a) At any time, held Indian passport, or
(b) Who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
Q4. Can an NRI/PIO purchase immovable property in India?
Ans: Under the general permission granted by RBI, the following categories can freely purchase immovable property in India:
(a) Non-resident Indian (NRI) - that is a citizen of India residing outside India
(b) Person of Indian Origin (PIO)- that is an individual (not being a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan), who:
(i) At any time, held an Indian passport or
(ii) Who or either of whose father or whose grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 1955 (57 of 1955).
The general permission, however, covers only purchase of residential and commercial property and not for purchase of agricultural land/plantation property/farm house in India. OCI can purchase immovable property in India except agricultural land/plantation property/farmhouse.
Q5. Can an NRI/PIO acquire agricultural land/plantation property/farm house in India?
Ans: It requires specific approval of Reserve Bank of India and the proposals are considered in consultation with the Government of India.
Q6. What is the Tax treatment for income generated from property selling or renting for NRI/ PIO/OCI?
Ans: The mere acquisition of property does not attract income tax. However, any income accruing from the ownership of it, in the form of rent (if it is let out)/annual value of the house (it is not let out and it is not the only residential property owned by that person in India) and/or capital gains (short term or long term) arising on the sale of this house or part thereof is taxable in the hands of the owner.
Q7. Is there any restriction upon the number of properties bought by NRI/PIO/OCI?
Ans: There is no restriction on the number of properties that can be bought.
Q8. Is there any specific way of payment for buying / acquisition of immovable property by NRI/PIO should be made out of?
Ans: There are multiple ways as mentioned below:
(a) Funds received in India through normal banking channels by way of inward remittance from any place outside India
(b) Funds held in any non-resident account maintained in accordance with the provisions of the Act and the regulations made by the Reserve Bank
(c) No payment of the purchase price for acquisition of immovable property shall be made either by traveler’s cheque or by foreign currency notes or by other mode other than those specifically permitted as above
Q9. What are the key points to be considered at the time of purchase?
Ans: Investment in real estate is a simple but long-term move so, one should be cautious enough at the time of purchase to secure the deal.
Few points of consideration are mentioned below:
(a) Property Title: The title of property should be clear from the issues and the seller should have the required right to sell it, especially if it is inherited or any joint property.
(b) NDC: Always check that there will be no outstanding electricity/water bills or any other authority dues pending with the property. Take a no dues certificate from the seller at the time of purchase
(c) Bank release letter: It is advisable to take the bank release letter from the concerned bank, if the property had been mortgaged as security in any type of loan
(d) Permits: The property for sale should have all approvals and permits from the civic authorities in terms of construction
Q10. What are the key points that ensure a safe deal to buy a property in India?
Ans: Below are the key safety measures to be considered while buying a property:
(a) Whenever you plan to invest in real estate, you should go through the proper channels, either through a Reliable Broking Firm, friend or relative to ensure the authenticity of the property
(b) You can also approach through property expos and seminars to choose a right property and select reputed developer
(c) It will be wise to get the title papers of the property verified by a lawyer before going ahead
If and when you want to purchase /dispose the property, you can give Power of Attorney to a reliable person who is resident in India & who may be able to act on your behalf to complete formalities such as registration, possession, execution of the agreement of sale, etc.
About the Author: Naveen Kr. Jain, VP, Head of Operations & Customer Services, IndiaHomes Property
Group, is an MBA & LLB with 16 years of experience in operations and customer
services. At IndiaHomes.com, he is responsible to ensure that all processes,
policies and practices followed by the organisation are customer centric and
should result in an optimal solution for the end user. Naveen has held senior
leadership roles in ING Vysya Bank, HDFC Bank & Stock Holding Corporation
of India. Being a certified six sigma black belt & ISO 9001: 2008 lead
auditor, the implementation of quality management systems and standards for
operational excellence have been Naveen’s key strengths and areas of focus.
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