One of the Greatest Indian dreams of this generation is buying real estate in India. A house in India is essential, irrespective of which corner of the world you currently reside in. The Indian laws, over the years, have evolved and made this a fairly easy job. The Reserve Bank of India governs such transactions and they fall under the purview of the Foreign Exchange Management Act (FEMA).

In this section, we give you a glimpse of all the fundamentals you are supposed to know if you are an NRI wanting to buy property in India. To begin with, we need to understand the definition of non-resident Indian. Since property purchases are governed by FEMA, we need to go by the definition of NRI as stated in FEMA. According to FEMA, an NRI is a citizen of India who is resident outside India.

Now let us understand the rules and implications:

How can NRIs invest in real estate?

According to the regulations of FEMA and RBI, an NRI is permitted to make specific investment in real estate. A NRI is allowed to do the following investments in property.

  • Any immovable property can be purchased by an NRI in India other than any agricultural land, farm house and plantation property.
  • He can get any immovable property as mentioned above by gift from Indian resident, Indian citizen residing outside India or person of Indian origin.
  • Obtain any property by inheritance.
  • He can transfer immovable property to any resident of India by sale.
  • He can transfer any agricultural land, farm house or plantation land to any resident of India by gift.
  • He can also transfer his residential or commercial property by means of gift to any person either residing in India or abroad or person of Indian origin.

Sources of finance:

NRIs consider financial institutions as an easy option available in India for purchasing any property. At the same time financial institutions consider NRIs as their potential clients. Financial institutions provide home loans easily, efficiently and sooner to such people as they are very much prompt at the time of repayment. Furthermore, the repayment can readily be done by inward remittance through the proper banking channel. If someone is already getting income in India from sources like rent or dividend, he/she can directly repay the loan as well.

Tax implications for NRIs looking for property in India:

An NRI has to shell out stamp duty as well as registration fees at the time of purchase. He is entitled to avail all sorts of benefits at par with Indian residents on the interest paid for the home loan. However, the tax process becomes full of twists and turns if the property is leased.


RBI has also predetermined these norms in home loans for non-residents who are looking forward to buying any property:

A maximum of 80 per cent amount is financed by the financial institution. The rest should be given by the NRI.The remittance of the amount for down payment can be done from the place of residence by normal banking channels,
i.e., NRO/NRE account in India.
The NRI has to repay his principal amount as well as interest part from that similar channel only.

As the amount of income received from such action comes under the head of income from property, therefore, standard deduction is applicable as per the standard slab. In this case, the NRI will have to pay the applicable tax if he is residing in the country where worldwide income is taxable unless the country has Double Tax Avoidance Agreement with India.

The special advantage for an NRI is the amount which is paid for the interest of home loan is deductible from NRI’s taxable income without any upper limit. The NRI is legally responsible for the payment of capital gains tax as prescribed under the Income Tax Act, in case he sells off the property.

Points to be considered at the time of purchase:

Investment in real estate is a simple move but there are several drawbacks as well. So, one should be cautious enough at the time of purchase to secure the deal. Few points of consideration are under: