NRI

NRI Section

The booming Indian real estate market has always been welcoming to its NRI crowd. The falling value of rupee has worked in the favor of NRIs for making real estate investments. You may purchase immovable property either because of your sentimental attachment to the home country, as a retirement plan, or as a profitable contingent investment. Lower risks, tax benefits, a decent rental yield are the major factors for increasing NRI real estate investments.

Implementation of Real Estate Regulation Authority (RERA) and enactment of Foreign Exchange Management Act (FEMA) by the RBI has made the real estate transactions more transparent and accessible to NRIs.

Key factors

Overview

As per the provisions of FEMA,
-NRIs (Non- Resident Indians) or
-PIOs (Persons of Indian Origins) or
-OCIs (Overseas Citizens of India)

can own both residential as well as commercial properties in India. A foreign national who is a ‘person resident in India’ can also purchase an immovable property but will have to obtain approval from concerned authorities. A foreign national who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Macau, Hong-Kong, and Bhutan would require prior approval of the Reserve Bank.

NRIs/PIOs/OCIs can purchase only residential and or commercial immovable property in India. NRIs cannot purchase any agricultural land, farmhouse, and plantation property. Such properties cannot even be acquired as gifts. However, ownership of such property is legal only if it has been inherited. The FEMA regulations are not applicable to hotels, tourism, and hospitals infrastructure like roads, ports, bridges, etc.

For registration formalities, the title deed needs to have the photograph, signature and thumb impression of the purchaser. The purchaser must have the following documents at the time of registration – Pan Card, OCI/PIO card, Passport size photograph, Passport, Address proof. In case of absence of the purchaser at the time of registration, a registered Power of Attorney can be issued to your immediate relative to sign the document in your absence.

NRI / PIO may transfer his residential/commercial property to a person resident in India, an NRI or a PIO as a gift. Foreign nationals of non-Indian origin resident in India or outside India who had earlier acquired immovable property under FERA with specific approval of Reserve Bank can continue to hold the same. They transfer such property only after getting approval from the Reserve Bank.

Immovable property can be acquired jointly with a relative. A person resident outside India, who is not an NRI or OCI and is a spouse of an NRI or OCI may acquire one immovable property jointly with his/ her NRI/ OCI spouse provided that the non-resident spouse is not prohibited from such acquisition. The marriage should be registered and must have subsisted for or a continuous period of not less than two years immediately before the acquisition.

Finances

Financial institutions provide loans up to 80% of the value of the property for NRIs. The remaining 20% must come from the buyers’ personal income. Income and educational qualifications play an important role in deciding the maximum amount of loan available to an NRI. The application for the home loan can be made online, as well as offline. The nature of documents will depend on whether the NRI is a salaried employee or whether s/he is self-employed.

The funds have to be paid from Foreign Currency Non-Resident (FCNR), Non-Resident External (NRE), or Non-Resident Ordinary (NRO) account. Payment cannot be made by foreign currency notes. NRIs can make equated monthly installment (EMI) payments for their apartments, either through their NRE, NRO or FCNR account.

If the property is put on lease, the rental income can be used for servicing the loan. It can also be paid from outside India via a proper banking channel or by debiting the NRE, or NRO, or FCNR account. Money transferred to the NRO account by close relatives is also accepted.

An NRI/PIO can sell property in India to a person resident in India, an NRI, or a PIO. Income from the property can be only be earned by putting it on rent, or by selling it. Repatriation of sale proceeds is restricted to not more than two such properties. The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only.

If an NRI owns more than one residential property then no tax will be applicable to the first property which is vacant as it will be declared as ’self-occupied’. If the property is sold off within 2 years of purchase, taxes are charged as per income tax slabs applicable to NRIs. When the property is sold off after it is held for more than 3 years, it is taxed at 20%.

Pune is the current hub for real estate investment. After getting the title of The most liveable city in India by MoHUA (Ministry of Housing and Urban Affairs), it would be a loss of a good opportunity to invest in a better future if you do not invest here. With a wide range of portfolio, Unity Infinity offers a variety in options to NRIs to grow their assets.

Get in touch to know how your real estate investment will generate effortless money.

Frequently Asked Questions

Under the general permission available, the following categories can freely purchase immovable property in India:

i) Non-Resident Indian (NRI) – that is a citizen of India resident outside India
ii) 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 or Macau or Hong Kong), who;

  • at any time, held an Indian passport, or
  • who or either of whose father or grandfather was a citizen of India by virtue of the Constitution of India or the Citizenship Act, 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.

There are no restrictions on the number of residential / commercial properties that can be purchased.

A foreign national of non-Indian origin cannot be a second holder to immovable property purchased by NRI / PIO.

A foreign national of non-Indian origin, resident outside India cannot purchase any immovable property in India. But, he/she may take residential accommodation on lease provided the period of lease does not exceed five years. In such cases, there is no requirement of taking any permission of or reporting to Reserve Bank.

Yes, but the person concerned would have to obtain the approvals, and fulfill the requirements if any, prescribed by other authorities, such as the concerned State Government, etc. However, a foreign national resident in India who is a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, and Hong Kong would require prior approval of Reserve Bank. Such requests are considered by Reserve Bank in consultation with the Government of India.

(a) Yes, NRIs and PIOs can freely acquire immovable property by way of gift either from

i) a person resident in India
ii) an NRI
iii) a PIO.

However, the property can only be commercial or residential. Agricultural land/plantation property / farm house in India cannot be acquired by way of gift.

(b) A foreign national of non-Indian origin resident outside India cannot acquire any immovable property in India through gift.

Yes, a person resident outside India i.e.

i) an NRI
ii) a PIO and
iii) a foreign national of non-Indian origin

can inherit and hold immovable property in India from a person who was resident in India. However, a citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan should seek specific approval of Reserve Bank.

A person resident outside India (i.e. NRI or PIO or foreign national of non-Indian origin) can inherit immovable property from

(a) a person resident in India.
(b) a person resident outside India.

However, the person from whom the property is inherited should have acquired the same in accordance with the foreign exchange regulations applicable at that point of time.

Payment can be made by NRI / PIO out of:

(a) funds remitted to India through normal banking channel or
(b) funds held in NRE / FCNR(B) / NRO account maintained in India.

No payment can be made either by traveler’s cheque or by foreign currency notes. No payment can be made outside India.

The amount of refund, together with interest (net of income tax) can be credited to NRE account. This is subject to condition that the original payment was made by way of inward remittance or by debit to NRE / FCNR (B) account.

(a) NRI can sell property in India to

i) a person resident in India
ii) an NRI
iii) a PIO

(b) PIO can sell property in India to

i) a person resident in India.
ii) an NRI
iii) a PIO – with the prior approval of Reserve Bank

(c) Foreign national of non-Indian origin including a citizen of Pakistan or Bangladesh or Sri Lanka or Afghanistan or China or Iran or Nepal or Bhutan can sell property in India with prior approval of Reserve Bank to

i) a person resident in India
ii) an NRI
iii) a PIO

(a) NRI / PIO may sell agricultural land / plantation property / farm house to a person resident in India who is a citizen of India.

(b) Foreign national of non-Indian origin resident outside India would need prior approval of Reserve Bank to sell agricultural land/plantation property / farm house in India

An NRI / PIO can mortgage to:

(a) an authorized dealer / housing finance institution in India without the approval of Reserve Bank.
(b) a party abroad – with prior approval of Reserve Bank.
(c) a foreign national of non-Indian origin can mortgage only with prior approval of Reserve Bank
(d) a foreign company which has established a Branch Office or other place of business in accordance with FERA / FEMA regulations has general permission to mortgage the property with an authorized dealer in India.

NRI / PIO may repatriate the sale proceeds of immovable property in India

(a) If the property was acquired out of foreign exchange sources i.e. remitted through normal banking channels / by debit to NRE / FCNR (B) account The amount to be repatriated should not exceed the amount paid for the property:

  1. in foreign exchange received through normal banking channel or
  2. by debit to NRE account(foreign currency equivalent, as on the date of payment) or debit to FCNR(B) account.

Repatriation of sale proceeds of residential property purchased by NRI / PIO out of foreign exchange is restricted to not more than two such properties. Capital gains, if any, may be credited to the NRO account from where the NRI/PIO may repatriate an amount up to USD one million, per financial year, as discussed below.

(b) If the property was acquired out of Rupee sources, NRI or PIO may remit an amount up to USD one million, per financial year, out of the balances held in the NRO account (inclusive of sale proceeds of assets acquired by way of inheritance or settlement), for all the bonafide purposes to the satisfaction of the Authorized Dealer bank and subject to tax compliance.

From the NRO account, NRI/PIO may repatriate up to USD one million per the financial year (April-March), which would also include the sale proceeds of immovable property.

The sale proceeds of immovable property acquired by way of gift should be credited to NRO account only. From the balance in the NRO account, NRI / PIO may. remit up to USD one million, per financial year, subject to the satisfaction of Authorised Dealer and payment of applicable taxes.

Yes, general permission is available to the NRIs / PIO to repatriate the sale proceeds of the immovable property inherited from a person resident in India. NRIs / PlO may repatriate an amount not exceeding USD one million, per financial year, on production of documentary evidence in support of acquisition / inheritance of assets, an undertaking by the remitter and certificate by a Chartered Accountant.

Yes, such loans are subject to the terms and conditions as laid down in FEMA However, banks cannot grant fresh loans or renew existing loans in excess of Rupees 20 lakh against NRE and FCNR(B) deposits either to the depositors or to third parties.

Such loans can be repaid :

(a) by way of inward remittance through normal banking channel or
(b) by debit to his NRE / FCNR(B) / NRO account or
(c) out of rental income from such property.
(d) by the borrower’s close relatives, through their account in India by crediting the borrower’s loan account.

Repatriation outside India means the buying or drawing of foreign exchange from an authorized dealer in India and remitting it outside India by-

  1. Through normal banking channels
  2. Crediting it to an account denominated in foreign currency
  3. Crediting it to an account in Indian currency maintained with an authorized dealer from which it can be converted in foreign currency

Yes, the principal amount can be repatriated outside India.

There is no tax incidence at the time of inheritance. So, neither the representative of the deceased, nor the inheritor, have to pay any tax at the incidence of inheritance.

In case the NRI/OCI owns more than one house property, including the inherited property and keeps them vacant, he has to choose one property as self-occupied and offer notional rental income, with respect to the other properties, based on the amount of rent which the property would fetch in the market. The NRI will have to file his income tax return in India, if his total income from all the sources including the rental and/or notional rental income exceeds the basic exemption limit.

If an NRI/PIO wants to sell his property to another NRI / PIO, he has to first obtain prior permission from the RBI. Long term capital gains are taxed at 20% and short term gains shall be taxed at the applicable income tax slab rates for the NRI based on the total income which is taxable in India for the NRI.

When an NRI sells property, the buyer is liable to deduct TDS @ 20%. In case the property has been sold before 2 years(reduced  from the date of purchase) a TDS of 30% shall be applicable.

Exemption under Section 54 is available when there is a long term capital gain on sale of a house property of the NRI. You can purchase a new property        either one year before the sale or 2 years after the sale of your property. You do not have to invest the entire sale receipt, but the amount of capital gains. Of course, your purchase price of the new property may be higher than the amount of capital gains.

  • If you can save the tax on your long term capital gains by investing them in certain bonds. Bonds issued by the National Highway Authority of India (NHAI) or Rural Electrification Corporation (REC) have been specified for this purpose.

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