The ideal NRI guide to purchasing a property in India

To a non – resident Indian, purchasing a property back home may seem like a perplexing step. The ever changing rules and methodology of making an investment will make any potential investor feel apprehensive about the outcome from such investments. Additionally, there are the different financial options to consider along with the taxation on the property as well as the financial option to consider. Given below are a few steps an NRI can refer to pertaining to property dealing within India:

Status of the individual: While the status of NRI may seem like a generic reference to individuals who are Indians who are not residing in India, it is classified only to a particular sector of non-residents. NRI’s are normally individuals who hold an Indian passport and are currently residing or have resided in another country for a consecutive of 180 days or more. In addition to this, there is an overseas citizen of India (OCI’s). Depending on the status of the individual, the consecutive property options and financial options will differ.

Restrictions on the purchasable property: Not all types of properties are available for such individuals. Properties that are not agricultural, plantation or farmland property, are purchasable by such individuals.

Funding the purchase: NRI’s who hold an NRE, NRO or FCNR options are eligible to purchase the property. These individuals can also use NRI home loans to finance the purchase, by using these NRI accounts to repay back the borrowed funds. At the same time, an NRI can take advantage of the loan availability and tax benefits to save funds in the long run. Plenty of multinational banks has different schemes in place to provide home loans, which are subjected to the restrictions related to the country bound property purchase.

Power of Attorney (POA): NRI’s who do not have the capability or functionality to travel to India to facilitate the purchase of the property, can opt to issue a POA. A POA can be a close relative residing in India, who can purchase the property contract on his behalf while registering the same in his or her name. This must be done in the presence of a notary or consulate officer in the country of residence. The POA must further adjudicate the purchase within months from the date of assigning the power.

Repatriation of funds and tax implications: When the sale of the property takes place, the repatriation of funds takes place. This can be done through the NRI home loans through the NRI account. As per the Indian tax laws, any NRI that holds property in India is not liable to pay tax unless there is rental income that is accrued from it. However, if the property is sold, then the capital gains tax, depending on the short or long term.


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