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The below content is purely for informational purposes and is not intended to constitute advisory of any kind. Please note, these are in-depth articles which are best viewed on large screen devices like laptops, desktops and tablets. The position reflected in this article has been updated as of January 15, 2024.

Purchasing an immovable property in India presents an opportunity for a Non-Resident Indian (NRI) and Overseas Citizen of India (OCI), to own real estate, make investments, etc. The process of acquiring property in India can be intricate and demands a comprehensive understanding of the steps involved. This article will guide you through crucial steps for you to make informed decisions ensuring your investment journey is a smooth and successful one.

The key steps involved in the purchasing of immovable property by an NRI/OCI in India include :

  1. Understanding the eligibility and restrictions applicable;
  2. Identifying a suitable property and conducting due diligence;
  3. Carrying out the valuation of the property;
  4. Finalising the sale/transfer documents;
  5. Payment of stamp duty;
  6. Payment of consideration to the seller;
  7. Registration of the property; and
  8. Getting relevant land records updated to reflect your name as the new owner of the property.

Below are points you may consider with respect to some of the aforementioned steps:

1. Eligibility and restrictions: As an NRI/OCI there are certain conditions with respect to the types of immovable property you may purchase in India as per the prevailing Foreign Exchange Management Act (FEMA) regulations*. In this regard, we encourage you to seek an expert’s guidance. An NRI can also buy property in India jointly with a resident Indian or another NRI, but they must adhere to certain conditions and regulations. You may also refer to the table below which broadly sets out the eligibility criteria, conditions and property types regarding NRIs buying property in India:

Please note, tables are best viewed on desktops and in landscape mode on mobile phones.

Status Eligibility/Conditions Number of Properties

NRI and OCI

NRIs and OCIs can buy any immovable property (residential and commercial) other than agricultural land, plantation property and farmhouse in India.

There is no restriction on the number of permitted immovable properties (residential and commercial) that you can purchase in your own name.

Foreign citizen, who is a spouse to an NRI/OCI

  • Your marriage should have been registered and subsisted for a continuous period of at least two years immediately preceding the purchase of the property.

  • Property has to be purchased jointly with an NRI/OCI spouse.

  • You should not be prohibited by any other Indian regulation from such acquisition.

May acquire one immovable property (residential and commercial) other than plantation property, agricultural land and farmhouse in India jointly with his/her NRI or OCI spouse.

Subject to the applicable laws (including FEMA and rules and regulations thereunder), you may choose to retain, sell, transfer, or gift your immovable property in consultation with your legal and financial advisors. You can transfer (whether by sale, gift, or through Will) the immovable property purchased by you to an Indian resident or another NRI or an OCI. Keep in mind that in case the transfer is by way of a gift, the beneficiary should be a relative as defined in section 2(77) of the Companies Act, 2013**.

For more information on the key legal aspects to consider while selling real estate, read this article.

*Foreign Exchange Management Act, 1999 and master direction number 12/ 2015-16 titled “Master Direction – Acquisition or Transfer of Immovable Property under Foreign Exchange Management Act, 1999” as updated on 01 September 2022

**Relative is defined under section 2 (77) of the Companies Act, 2013 to mean with reference to any person, any one who is related to another, if (i) they are members of a hindu undivided family, (ii) they are husband and wife, (iii) one person is related to another in such manner as prescribed under rule 4 of the Companies (Specification of definitions details) Rules, 2014.

 

2. Identification  and due diligence: After identification of the property, it would be prudent to appoint a local lawyer who is well-versed in the subject matter to undertake a property due diligence exercise. This is to verify and ensure that, with respect to such identified property:

  • All the necessary approvals, certificates, authorisations and permits are in place.
  • The right, title and interest in relation to the property are in the possession of the seller and there are no encumbrances on such property.
  • All payments required to be made by the seller in terms of the bills, dues and taxes, have been duly made.
  • There is no action that adversely affects the interest or right of the seller in the shortlisted property.

 

3. Valuation: You could undertake the valuation of the property through a qualified professional to ascertain the true market value of property so that you do not pay a higher amount for the purchase. Additionally, the valuation would also help in calculating the appropriate stamp duty and registration charges.

 

4. Finalising the transfer documents, payment of stamp duty and registration:

  • Documentation: Depending on the agreement between the buyer (you) and the seller, the parties may decide to first execute the agreement to sale, followed by the sale deed, or directly sign the sale deed/deed of conveyance. The transfer documents should include details of the parties to the transaction, a description of the property and other terms and conditions (commercial, legal and statutory).

The key differences between the two are:

Please note, tables are best viewed on desktops and in landscape mode on mobile phones.

Agreement to sale Sale deed/Deed of conveyance

‘Buyer’ and the ‘seller’ enter into an agreement in relation to the transfer of ownership at a future date subject to the fulfilment of certain terms and conditions.

Property ownership is transferred from the seller to the buyer pursuant to the terms agreed between them in an agreement to sale or directly in this document.

Precedes the execution of the sale deed.

Primary document if no agreement to sale is executed.

Does not in itself effect the transfer of ownership and must be followed by an execution of the sale deed/deed of conveyance.

Effects the transfer and acts as a buyer’s title document in relation to the property purchased.

  • Stamp Duty : Applicable stamp duty would be required to be paid on the relevant transfer document prior to its signing. Do note that the rate of stamp duty depends on various factors such as the location of the property, the relevant state-specific stamp act, value of the property, the amount paid as per the agreement.
  • Registration : The Registration Act, 1908 inter alia requires that any instrument which creates, declares, or assigns any right, title, or interest, of the value of 100 and upwards, to or in immovable property, then registration of such document is compulsory. Therefore, you will have to register the transfer/sale documents with the relevant sub-registrar of assurances, make the payment of registration fees which may vary as per the applicable state-specific registration act.

You may consider granting a Power of Attorney (PoA) to an Indian resident if you are unable to be physically present in India to sign the transfer documents and undertake other formalities.

 

5. Payment: The payment for the purchase of immovable property can be made by an NRI/OCI in the following manner:

Please note, tables are best viewed on desktops and in landscape mode on mobile phones.

Status Modes of payment

NRI and OCI

Currently, FEMA provides the following in relation to the payment of consideration for purchase of immovable property:

a) Payment should be made from the funds received in India through an inward remittance in your Non-Resident External (NRE) account / Non-Resident Ordinary (NRO) account; and

b) Payment should be made from your NRE account/ NRO account/ Foreign Currency Non-Resident Bank (FCNR (B)) account; and

c) Payment cannot be made either by traveller’s cheque, foreign currency notes, or any other mode except as specified above

Foreign citizen, who is a spouse to an NRI/OCI

The current FEMA regulations provide similar conditions in respect of payment of consideration for the purchase of immovable property as listed above for an NRI and OCI, except that the payment should be made from the relevant non-resident account.

Subject to the applicable laws, you can seek a housing loan from an authorised dealer bank or housing finance institution in India* to acquire residential property in the country.

Additionally, an authorised dealer bank in India may grant a rupee loan to you, among others, against the security of immovable property (other than agricultural or plantation land or farmhouse) in accordance with the prevailing laws and conditions stipulated thereunder for meeting your personal requirements or for your own business purposes. Such immovable property can also be a property in India which is designated for commercial use.

*Provided that such institution is approved by National Housing Bank

Avail home loan

 

Tax implications

According to the rules, income tax on NRI property in India is generally applicable in the same way as to resident Indians. Please note:

  • While purchasing a property worth more than ₹50 lakhs from a tax resident in India, you must deduct Tax Deducted at Source (TDS) at the rate of 1%.
  • However, if the said property is bought from someone who is a non-resident, TDS is deducted at the maximum rate i.e., usually 30% with an additional surcharge and cess applied (capped at a maximum of 39%).
  • Further, any income generated from the property located in India is also subject to tax. So, if you let out the property, the rental income earned will be taxable after considering the standard deduction of 30% and the municipal taxes paid, if any. In case of any interest paid on loan borrowed for purchase of such property, the same can also be set-off against the rental income and balance net rental income will be subject to tax. Such net rental income will be taxed accordingly to the income tax slabs as applicable to the NRI.

    To read more about tax implications and repatriation rules for NRI, click here. If you face taxation for the same income in your resident country and India, check whether your country has signed a Double Taxation Avoidance Agreement (DTAA) with India. You may be able to avail benefits as per DTAA. It is advisable to consult a tax and legal professional to ensure complete understanding and compliance with the regulations.
Conclusion

The prospect of investing in Indian real estate is undoubtedly appealing. However, it necessitates a meticulous approach, adhering to the eligibility criteria and navigating the legal complexities. By understanding the key steps involved, conducting thorough due diligence and following documentation requirements, you can make legally compliant acquisitions, ensuring that your property investment in India yields fruitful results.

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Frequently Asked Questions

Can you as an NRI sell a property that you inherited?

Yes, NRIs can sell any immovable property including residential or commercial, agricultural land or plantation property or farmhouse in India that they have inherited, to a person resident in India.

With respect to the sale to another NRI or OCI, you are only permitted to sell inherited residential or commercial property. 

Can an NRI repatriate proceeds from the sale of an immovable property in India?

Subject to fulfilment of certain conditions (such as the immovable property being acquired in accordance with the laws in force at the time of acquisition, repatriation of sale proceeds being restricted to a maximum of two residential properties, etc.), the authorised dealer (bank) may allow repatriation of the sale proceeds outside India from the sale of immovable property. For information on the key aspects to consider while selling an immovable property in India which is inherited or self-purchased, click here.

If an NRI buys a property in India, can he/she sell it after one year?

Yes, the extant FEMA regulations do not prescribe any mandatory minimum ownership period. However, it's important to comply with all relevant regulations, including taxation laws, and seek legal advice as these regulations can change over time..

Disclaimer:

The contents of this article/infographic are meant solely for informational purposes. The contents are generic in nature and are not intended to serve as a substitute for specific advice on any matter whatsoever. The information is subject to updation, completion and verification and the applicable norms may keep changing materially from time to time. This information is also not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to applicable laws or would subject ICICI Bank Limited/its affiliates to any licensing or registration requirements. ICICI Bank Limited/its affiliates and their representatives shall not be liable for any direct or indirect losses or liability incurred arising in connection with any decision taken by any person on the basis of this content. Please conduct your own due diligence and consult your financial advisor before making any decision. Terms and conditions of ICICI Bank and third parties apply. ICICI Bank is not responsible for third party services. Nothing contained herein shall constitute or be deemed to constitute an advice, invitation or solicitation to avail any products/ services of third parties.