If you’re a Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) eyeing property purchases in India from the USA, this comprehensive guide is tailored for you.
We’ll delve into everything you need to grasp about acquiring a house in India, encompassing the requisite documents essential for an NRI to secure property in India and the method to organize a power of attorney for an NRI to execute property transactions in India remotely.
To facilitate cost savings when purchasing properties in India from abroad, we’ll also introduce Wise, offering low-cost international payments. Enjoy mid-market rates and transparent fees, saving six times compared to conventional bank transactions.
Types of immovable property permissible for NRIs/PIOs:
As an NRI venturing into property acquisition in India, you possess the liberty to procure most categories of real estate. Residential and commercial properties are both sanctioned for NRI and PIO acquisitions, provided the process aligns with FEMA (Foreign Exchange Management Act) regulations¹.
However, an exemption lies in purchasing agricultural land, plantations, and similar holdings. In such instances, additional permissions are requisite before procurement, with approvals granted on a case-by-case basis.
This implies that NRIs and Green Card holders are precluded from acquiring agricultural properties, including farmhouses attached to agricultural land, sans official authorization.
Continued ownership of land or property post non-residency:
If you acquire property in India while a resident and subsequently relocate abroad, you retain the entitlement to retain the property—even if it encompasses agricultural land, which would otherwise be inaccessible to NRIs.
Procedure for NRI property acquisition in India:
The procedural steps for NRIs to procure property mirror those of resident Indians—the principal divergence lies in acquiring power of attorney if you’re not physically present in the country.
Seek competent local counsel if you’re situated outside India to ensure adherence to all legal requisites during property transactions and mitigate any unwarranted risks.
Here’s an outline of the fundamental steps:
Engage a local solicitor and notary.
Identify a realtor in your desired location.
Arrange power of attorney if you won’t be physically present in India for the transaction.
Identify a property and negotiate a purchase price.
Your solicitor will conduct due diligence checks and formulate a sale agreement.
Execute the sale deed personally or through your representative.
Register the property acquisition.
Essential documents for NRI property acquisition in India:
Here’s a breakdown of the typically mandated documents when procuring property in India as an NRI:
Passport—supplemented by proof of NRI status such as a PIO or OCI (Overseas Citizen of India) card.
PAN (Permanent Account Number) card.
Power of attorney if the transaction isn’t executed in person.
Proof of address and identity for registration of property purchase.
Acquiring power of attorney for NRI property acquisition in India:
If you’re unable to travel to India for property transactions, you can still proceed with acquisitions as an NRI by delegating power of attorney (PoA) to a representative. This empowers your representative to act on your behalf in legal matters pertinent to property procurement.
You can orchestrate power of attorney through your nearest Indian Embassy or Consulate. While the process may slightly differ across locations, you generally need two witnesses available to endorse your PoA and must furnish your OCI/PIO card along with recent passport-sized photographs².
Financial considerations for NRIs purchasing property in India:
While property acquisition presents a promising investment avenue, it also entails substantial commitments. Let’s swiftly explore some financial considerations associated with purchasing property in India.
Securing a home loan in India as an NRI:
As an NRI, you might qualify for a home loan in India. However, banks establish their eligibility criteria, contingent upon factors like property type, value, location, and utilization plans.
NRIs often encounter requests for larger deposit amounts compared to Indian residents. Moreover, the interest rates extended to NRIs may be less favorable than those offered to Indian residents.
Requisite documents for procuring an NRI home loan:
Eligibility for a home loan in India necessitates furnishing a suite of supporting documents, albeit specifics vary across banks. Expect requests for:
Your passport and PIO/OCI card.
Evidence of legal status in your residing country.
Income proof and existing debt documentation.
Credit score from your residing country.
Payment modalities for property acquisitions in India as an NRI:
Whether via a home loan or outright purchase, you’ll likely need to make an upfront payment upon deal closure. Per RBI regulations, property payments must be executed through remittance from overseas in INR or from balances in your NRE/NRO or FCNR accounts. Notably, presenting foreign currency for property payments in India isn’t permissible.
Repatriation of funds from overseas:
Upon divesting your Indian property, you’re eligible to remit the proceeds overseas subject to RBI regulations. To effectuate fund repatriation, you must demonstrate property acquisition adherence to FEMA regulations and settle any pertinent local taxes. For transactions involving more than two properties, RBI approval may be imperative¹.
Tax implications for NRIs procuring property in India:
Property acquisitions in India incur several local taxes, encompassing stamp duty, registration fees, and legal expenses³. Depending on transaction arrangements, realtor fees may also apply. Retaining NRI status post-property acquisition typically warrants income tax liability solely on India-sourced income⁴. Altering residency status to Indian tax residency entails revised tax obligations. Professional tax guidance is advisable to ensure compliance with both Indian and residing country tax laws.
Whether contemplating residential settlement or investment ventures in India, leverage this guide as a foundational resource elucidating the intricate property acquisition process.
And remember to opt for Wise when effectuating money transfers for property acquisitions in India to realize sixfold savings compared to conventional bank channels.
