The NRI Property Buyers Guide
Sandeep Sadh offers some valuable tips to non-resident Indians on buying, selling and repatriation
Sometimes, NRIs who have either have stayed abroad for a long time and have had little exposure or understanding of the real estate market, shy away from buying and selling property due to complexity of the laws and transaction issues in India. It’s also seen that not only are they unable to exit at the opportune moment but also that the properties remain Non-Performing Assets even after possession.
It is important not only to understand the legal and taxation issues while you buy and sell your property in India but also essential to understand the process and tax liabilities involved.
THE BUYER’S CHECKLIST
Highlighted below are important points for buyers to note:
NRIs, PIO and OCI Card Holders Can Buy Homes and Offices in India
Anyone who holds an Indian Passport or a Foreign Passport with Overseas Citizenship of India (OCI) or (Person of Indian Origin (PIO) Card is allowed to buy property in India without the requirement of approaching the Reserve Bank of India and can freely buy and sell property as any other Indian citizen in India can. If you have a foreign passport and you are of Indian Origin or your spouse is Indian then you can apply to the Indian High Commission in your Country for an OCI or a PIO Card. Once you submit your proper proof of Indian descent or the marriage certificate as per the documents prescribed by the High Commission, you can get the OCI cards in a couple of months maximum.
Documents Required for Buying a Property in Mumbai, or Most Metros
The documents required for buying a property are:
- Non-Resident External (NRE) and Non-Residential Operational (NRO) account:
In NRE accounts, you can send the money from overseas but you cannot deposit the money in India in these accounts. You can issue payments from these accounts.
In NRO accounts, you can deposit the amounts you generate as Income by way or Rent, Interest or any other income or sale proceeds.
Tip: You should open a bank account with a reputed Indian Bank in your country, where they can service you with your needs of funds remittance, transfer to the developer and so on and have good online banking facilities.
- Pan Card – Permanent Account Number – Income Tax:
You would require this mandatorily if you are buying or selling a property in India, and since most of the values are above ₹500,000 this is a must for property buying. You can get this within 15 days to a month and you can apply online at the National Securities Depository Limited (NSDL) website,
- Address Proof
If you have a local address, great, else, it is a good idea always to hire a Chartered Accountant who can help you with the Pan Cards, Power of Attorney (POA), and so on, or your Real Estate Advisor who can help you begin the buying process.
- Power of Attorney to Sell and Buy
In India, you can give the Power of Attorney to buy to any of your relatives, friends, chartered accountants, lawyers and friends.
The process for this is quite simple.
- Draft the POA and put in the property details. A standard POA is available on
You can fill the details of the property, the buyer and the person you wish to make as the attorney.
- Then you need to go to your local Indian High Commission and get the document attested at the Indian High Commission in your city/country.
- Send the documents back to Mumbai for adjudication and stamping. This needs a stamp duty of Rs.500/- and a copy of your passport. It is ready in a few days.
Once, the POA is adjudicated, your POA holder can execute the Agreement for Sale and Register the same with the Registrar and pay Stamp Duty, among other things.
Kindly note for selling property, you only can give this POA to your wife or to a blood relative like your father, mother, sister, brother, son or daughter.
If you are looking for a property in India, it’s advisable that you take a home loan against the same. Banks do a very strong due diligence on the property and it safeguards you completely. Even if you take a small home loan of, say, 20% of the property value, it is good enough. If you have income in India, you can set off upto ₹2,50,000 per year against that and also you don’t have to worry about keeping your original documents safe as they are kept in safe custody of the bank in any case.
Furthermore for NRIs, having a bank in the transaction provides immense comfort to the home buyer as sometimes, the commitment by the developers on legal clearances may be in the pipeline. If there is a grey area it would come up very quickly and is a better option than the NRI sitting overseas and realising this much later. This is an important consideration.
Who can apply for NRI Home Loans?
- Profiles:Non-Resident Indian (NRI), Person of Indian origin (PIO), Overseas Citizen of India (OCI), except Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan.
- Age:The minimum age of the applicant should be 24 years. The maximum age limit is 60 years or retirement age (whichever is earlier), at the time of loan maturity.
- Work experience: The applicant should have a minimum overseas work experience of six months with total work experience of two years.
- Minimum Income:
For GCC Countries – AED 5000/- p.m. (or equivalent);
Other Countries and USA – USD 3000/-p.m. (or equivalent);
For Merchant Navy – USD 2000/- p.m. for nine months.
Home Loan Documentation for NRIs
- Complete Passport copy and Work Visa copy;
- Overseas address proof e.g. utility bill, card statement, House lease agreement, bank statement etc.;
- Salary Slip for three months;
- Appointment letter or Contract Copy;
- Salary a/c and NRE/ NRO a/c statement for six months;
- General Power Of Attorney.
Once the property is ready, there are three options an NRI has:
Hold for Personal Use
If the property is for personal use, there is nothing to be done; just pay the regular monthly society charges and municipal taxes.
If one has to lease, then the income from the same is taxed after a standard deduction of 30% on the rent.
You can repatriate the rent income whenever you like by obtaining a Chartered Account Certificate.
This is the part, which needs detailed attention. If you are selling a property the first thing you need to do is compute your Capital Gains, if you fall in the Short Term Capital Gains (STCG) category or Long Term Capital Gains (LTCG).
The STCG is equivalent to your income tax current slab and the (LTCG) is calculated based on the inflation index and usually the tax amounts to any where lesser than 20% if you are holding for 3 years.
The most important part about NRI selling is the TDS – Tax Deduction at Source.
As per the Income Tax laws, anyone buying a property held by NRI or NRIs has to mandatorily deduct TDS of 30% of the consideration amount.
To void this, the NRI Seller has to obtain a Lower Tax Deduction Certificate from the Income Tax office.The NRI’s Chartered Accountant has to submit a detailed computation of the Capital Gains based on the Purchase and Sale value and if the proceeds are re-invested again into real estate.
To initiate this, the NRI must have filed Income Tax Returns for the last two years.
It is important that NRIsfile regular returns in India so that once they are close to any property transaction, they should not be hassled by excessive paperwork at the last minute.
After all the taxes are computed and paid to the Government of India, the NRI seller can repatriate the proceeds to any foreign bank abroad and this can happen only once the Chartered Accountant issues a certificate.
When a non-resident Indian (NRI) buys and sells properties, it is most important for him/ her to ensure that bank statements are in order, and to engage a Chartered Accountant. Taxes also must be up to date in order to sell or lease properties and repatriate the funds. If you are making an investment in the real estate sector, you must be able to realise your gains when the investment matures or make substantial profits on your base investment.
Articles by Sandeep Sadh, CEO – Mumbai Property Exchange