Investment in Indian Property – As an NRI investor know your facts

Investment-in-Property-–As-an-NRI-investor-know-your-facts

The first question in the minds of any potential property investor is mostly regarding the safety of such an investment. 

The answer, though not difficult, does involve an analysis of the economy and exercise of due diligence in the area of investment.  The relief factor, however, is that there are competent Professionals and Law firms who assist and guide the investor to decide prudently.

Investment in Indian Property is a lucrative option. It is supported by investor-friendly policies of RBI and the guidelines of FEMA. The introduction of RERA (Real Estate Regulatory Authority) has driven the NRIs to invest in India. There is a rise in accountability, which has helped to gain their confidence.

Investment decisions are broadly based on profitability and governmental policies.  

For NRIs, there is another significant factor that motivates them to invest in India. It is the opportunity to stay connected with the roots and the native place.

NRIs must remember:

NRIs can invest in any commercial or residential Indian Property, except agriculture land, plantation, and farmhouses.  

NRIs can purchase more than one residential or commercial property without any permission from RBI or Government. There is no need to inform the RBI about such a transaction.  

Read More: NRIs Alert! Buying property in India? The guidelines

For Investment in Indian Property, NRIs must know:

  • Conformity to rules: NRIs must comply with the guidelines of RBI and FEMA for investment.
  • Loan Availability: 

RBI has issued general permission to all banks to provide loan facilities to the NRIs for the purchase of Property in India. NRIs have to meet the eligibility criteria and must possess the requisite documents, like valid passport, PAN Card, Photographs and other prescribed documents.

  • Mode of payment: All payments have to be made in Indian Currency. NRIs who buy the Indian property can make the payment,
  • By remitting through proper banking channels from abroad.
  • By making use of funds in the NRE/NRO/FCNR accounts. Even, the housing loan that has been availed is repaid using funds from these accounts.

Taxation Policy:

  • Income from investment in the property is either in the form of rental income or capital gains. This income is taxable. 
  • Under DTAA (Double Taxation Avoidance Agreements), an NRI can claim the tax credit in his country of residence, for taxes paid in India.
  • The income tax (TDS) rate is 1% of the value of the property if the value of the property bought is more than Rs 50 lac. The rate is higher if the seller of the property is also NRI. 
  • If NRI avails home loan to buy a property, the interest paid on loan is deductible from the taxable income.
  • In case NRI sells the Property, TDS is deducted at the rate of 20% on short term capital gains and 30% on the long term capital gains.

Repatriation of sale proceeds: 

The limit for repatriation of sale proceeds is US Dollars One million per financial year. The sale amount is deposited in NRO account and repatriated after payment of tax. For repatriation, the proper procedure of the bank is followed. If the amount exceeds the limit, the permission of RBI is required. 

Read More: FEMA – How it defines citizens

There are many factors existing today in India to lure the NRIs to invest in Indian property – all that one needs is due diligence and proper analysis.

What benefits budget 2019 has for NRIs

NRI Budget 2019

NRIs have a reason to feel happy and relieved with the new Finance Minister Nirmala Sitharaman’s Budget for the year 2019.

For a start, their welcome into the country just became warmer! The Union Budget of 2019 has proposed to consider issuing the Aadhaar Cards to NRIs (who have Indian Passports) post their arrival in the country.

  • Fast process for Aadhaar Card
  • Easy NRI investments
  • More Indian Embassies and High Commissions
  • Global Investors Meet in India

Till this budget, NRIs had to wait for a period of 180 days. Earlier under the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, NRIs who have resided in India for a period of 182 days or more in 12 months and with an Indian address could apply for Aadhaar.  The issue of Aadhar card to NRIs on arrival to India will help NRIs to a great extent as aadhar card acts as both identity card as well as proof of address as it consists of both demographic and biometric data.

The Finance Minister declared “I propose to consider issuing Aadhaar card for non-resident Indians (NRIs) with Indian passports after their arrival in India without waiting for the mandatory 180 days.”

NRIs interested in investing in India can also heave a sigh of relief now – our Finance Minister paved the way for them to have easier access to Indian equities. The NRI-Portfolio Investment Scheme Route has now been merged with the Foreign Portfolio Investment Route. 

In addition, with NIIF as an anchor, there will be annual Global Investors’ meet organised in India. This is being done to encourage major global investors to come and invest in India. Moreover, there are steps to open Foreign Direct Investment in aviation, media, animation AVGC and also to open up FDI up to a 100% level for insurance intermediaries. This will bring in a single regime for foreign investors. It also seeks to regulate investments and funds brought in by the non-resident Indians and person of Indian Origin.

The move on the FPI aspect has come about as part of the recommendation of the H R Khan Committee. The economy can be assured of larger pools of NRI capital through pooled and professionally managed structures. Foreign Portfolio Investment refers to the grouping of assets including bonds, equities and cash equivalents. These portfolio investments are held directly by an investor or managed by financial professionals.

In the past the cap on NRI participation through the FPI route had received serious push back from global fund managers. As reported in the media, the Securities and Exchange Board of India said if single and aggregate NRI/OCI holdings in assets under management of FPIs are below 25% and 50%, respectively, then such persons will be allowed to be constituents of the FPI. In case of breach, the FPI will need to comply within 90 days and in case it remains non-compliant even after 90 days, no fresh purchases will be permitted and such FPIs will have to liquidate their existing position in the Indian securities market within 180 days.

This move on FPI will bring in additional benefit since earlier in the year, SEBI came out with the rules for the merger and also exempted both housing finance and non-banking financial companies. From now, none of them will have to disclose the rise and fall in the shareholding due to encumbrance or release of encumbered shares. Currently, only the scheduled commercial banks and public financial institutions are exempted from disclosures.

Why and where to invest in property in India

real estate investment

Real Estate investment has always been a lucrative option. It still attracts a lot of investors for building on wealth as it promises good returns. Real Estate covers:

  • Housing sector
  • Retail
  • Hospitality
  • Commercial

Indian Real Estate sector is also a good option for NRI investors as there is a lot of scope and potential for growth in a large number of Indian Cities.


Read: Increasing Benefits of Property Investment in India


There are many factors which influence Real Estate Investment Decisions:

  • Political Stability
  • Infrastructural growth
  • Connectivity of a place to airports and other major cities
  • Government Policies in General and Particular for the area – ease of business, transparency, speedy disposals of proposals etc.
  • Tax benefits
  • Quality of Life – Basic Amenities, Education and health facilities
  • High paying jobs – more beneficial for investment in the housing sector
  • Migration – Inflow of people
  • Prospects for future development
  • Emotional bonding with hometown – the special reason for many NRIs as they want to create an asset in their hometown to settle down after they come back to native place
  • Affordability

When it comes to choosing cities for Indian Real Estate Investment, Delhi, Mumbai, Chennai and Kolkata has always been a favourite. They have had their share of growth and development. There is saturation in the property market. The possibility of future growth is limited.  Now their periphery area is attracting investors, eg. Navi Mumbai.


Read: Investment Options for NRIs


Recently, the Tier II Indian cities are attracting real estate investment, as:

  • Government’s efforts: Indian Government’s Smart City projects under which they aim to develop Tier II cities by providing core infrastructural facilities, a decent quality of life and clean environment besides smart solutions. Economic decisions like GST and regulatory authority like RERA which has brought transparency and accountability are also boosting investment.
  • Property is available at affordable price and high Rental Income
  • Improving Infrastructure, health facilities and educational institutions
  • Migration

List of top most Indian Cities for Real Estate Investment with reasons:

  1. Bangalore – Infrastructure, Connectivity, IT sector induced demand
  2. Chennai –Rising demand due to fast-growing economy (manufacturing, health, automobile, technology sector), Affordable property rates and good rental rates.
  3. Mumbai – areas like Thane and Navi Mumbai enjoy proximity to Mumbai, Employment Opportunities, and demand for residential accommodations.
  4. Pune- Lot of migrants in the IT sector has drawn steady demand for further investment
  5. Hyderabad – Presence of IT employees raises demand in housing and retail sector, Connectivity to Airport and State Government facilities for investors
  6. Kochi – Government’s initiatives like single window clearance, discounts to NRIs for investing, better infrastructure, educational Institutions drawing migrants, all are leading to property sector growth.
  7. Ahmedabad – Employment Opportunities, Improved Infrastructure, demand for houses, Transparent and easy procedures
  8. Bhiwadi – City is catching up for Investment. Proximity to Gurgaon and International Airport, IT sector presence, Affordable prices, Infrastructure are an advantage.
  9. Thiruvananthapuram – Growing IT sector, City’s tourism potential, Infrastructure, Healthy Lifestyle.
  10. Coimbatore- City is close to many tourist destinations, upcoming infrastructural facilities, growing service sector including IT firms, Flourishing manufacturing and retail industries.

Read: Government Initiatives and NRI Investments in India


In case of NRIs, besides, the monetary reasons, emotional connection with their hometown for settling down in the future is also a major factor which drives their real estate investment decisions.

Indian Real Estate holds a lot of promises for good returns on investment.

What are the things to remember while investing in property in India?

investing in property in India

Property investment in India is popularly thought to be a safe and profitable long-term investment option. It has always been more reliable than investing in stocks. However, the market does face liquidity and other risks from time to time.

To avoid such risks involved in the property market as an investment, one must remember the following tips before finalising on any property:

Selection of property

  • For a property investment in India selecting the right property at the right place as per the budget is very crucial.
  • There is a surplus of choices available in the market, so one must decide as per his/her requirement rather than get swayed by any market gimmicks. Pick a property that is according to the budget and in a preferred location.
  • Researching and reading well on the means of buying is equally essential. Researching is important because it will eventually lead one to his/her desired property, and while researching, consulting a broker, online or directly through the builder before finalising the purchase makes the deal even better.
  • Before shortlisting the property one wants to opt for, a thorough check on the builder’s track record/his credibility is also a must. It can be done through reviews on real estate portals or talking to friends and relatives who have invested before and via actual site visits.

Financial considerations while investing in property in India

  • If one is taking a loan, then one must get the loan eligibility checked from the respective bank even before searching for a property in India. This is important to get the required loan amount sanctioned. It will also ease the process of approval and will give the confidence about one’s worthiness in the market.
  • While investing in property in India, it is suggested to the investors that they get their credit report extracted from Credit Information Bureau (India) Ltd. It is a necessary procedure especially when one is applying for a home loan. A good CIBIL score helps in arranging for better interest rates for the loan sought. It would also help in saving other charges levied by the banks and even get a speedy sanction of the loan, saving a lot of hassles, paperwork and time.
  • Other than your eligibility for a loan, one must check for internal and external quality of construction of the Property, all legal paperwork from the builder and layout plan of the project. Carefully reading the Booking form and Sale Agreement before signing is a must as some of the clauses could be in favour of the builder.
  • Investment in property in India is unlike investing in share market or equities or mutual funds wherein one can spend a short time and accumulate profits. Investing in estate requires an investment of at least five years as the rates of property rise or drop due to the social, civic and road development in the neighbouring area factors.

Legal Considerations

  • Lastly consulting a lawyer or professional for the Agreement of a sale plays an important role. One must take help from a chartered accountant or lawyer.
  • Unless one is an expert, the nuances or clauses mentioned in the Sale Agreement might get missed. A lawyer or CA can explain the needs and importance of documents needed to cross check before closing the deal.
  • Legal intervention is thus necessary in case the other party is not abiding by the laws or trying to fool you.
  • A lawyer also helps the consumer understand the nitty and gritty of various terms and market concepts along with the risks.
  • Property investment in India is still an unorganised sector, and many consumers might be helped to a great extent if they do thorough research before buying a property.

Reasons for Investing in Indian Real Estate

Reasons for Investing in Indian Real Estate

A few decades ago, investing in real estate was a luxury, a way of boasting their social standing and not a necessity. But today, in this era of globalization investing your money in property is not merely imperative but also one of the most tried-and-tested ways to grow that money over the coming years. Following are a few reasons as to how investing money in the realty business is one of the safest bets for NRIs (Non – Resident Indians):

  • Stay Connected, stay rooted: No matter how much one loves living abroad, having a house back home in one’s own country gives a sense of belonging. Moreover, wherever you stay, at some point you are sure to say ‘Take me home’ country roads.
  • Rent Benefits: Having an extra property in India, would pose as an additional source for your income. Even though NRIs have to pay tax on the rental income, a part of it gets compensated under Section 80 (C).
  • Retirement Benefits: Senior citizens who own property in the country get benefits of Reverse Mortgage, i.e. money taken from the bank towards this Mortgage is not considered as a part of the income of the NRI.
  • Price Benefits: Along with the emotional connect and the benefits of rent, affordability of properties is yet another reason of why investing in real estate is lucrative for NRIs.
  • Long-Term Returns: The real estate industry has observed tremendous growth in the last decade or so and is further expected to rise by 10-15% per annum.
  • Controlled Asset: While in order to invest in shares and stocks you might require a broker, real estate investments are simple enough to be done on your own, especially with the various portals available for property purchase and sales such as Makaan.com and 99acres.com. These websites provide all the required information such as the localities and any and every query can be answered.
  • Ample Finance Options: From banks to the various Financial Companies along with numerous private lenders, there is truly no dearth of money in this business.
  • Pass onto next generation: Real estate properties can be passed onto the next generation, this is one such investment which will continue to grow and prosper. No other company or National Stock Exchange has topped the market in a row during the last decade.

Thus, investing in real estate would turn out to be the fruitful endeavour, which would not only benefit you but also your children and the coming generations.