NEWS

Introduction

Investing in Indian real estate is an attractive option for Non-Resident Indians (NRIs) looking to diversify their portfolios or establish a home in India. However, the process involves several legal and regulatory considerations that NRIs must be aware of to ensure a smooth transaction. At Franch Realty, we guide NRIs through the legal framework, compliance requirements, and best practices for investing in Indian real estate.

Key Legal Aspects NRIs Must Consider

1. Eligibility for Property Investment

As per the Foreign Exchange Management Act (FEMA), NRIs can buy, sell, or inherit residential and commercial properties in India. However, they cannot purchase agricultural land, plantation property, or farmhouses unless inherited or gifted.

2. Funding the Investment

• NRIs must use their Non-Resident External (NRE) or Non-Resident Ordinary (NRO) accounts for property transactions.
• Payments should be made through Indian banking channels via inward remittance, NRE/NRO accounts, or FCNR (Foreign Currency Non-Resident) deposits.
• Home loans are available from banks and financial institutions registered with the Reserve Bank of India (RBI).

3. Title Verification and Due Diligence

• Conduct a title search to ensure clear property ownership and absence of legal disputes.
• Verify that the seller has legal rights to sell the property and that all property documents are in order.
• Check for any existing encumbrances, unpaid dues, or litigation issues.

4. Regulatory Approvals & Compliance

• Ensure the property has been approved by the local development authority.
• Check compliance with RERA (Real Estate Regulation and Development Act) for transparency and protection against fraud.
• Verify approvals for construction, land use, and environmental clearances.

5. Taxation & Financial Considerations

• TDS (Tax Deducted at Source): NRIs must pay TDS at 20% on long-term capital gains and 30% on short-term capital gains if selling a property.
• Rental Income Tax: Rental income from property in India is taxable, but NRIs can claim deductions under Section 80C.
• Repatriation of Funds: The RBI permits NRIs to repatriate proceeds from property sales under certain conditions, including payment of applicable taxes.

6. Power of Attorney (PoA)

• If the NRI cannot be physically present in India, they can authorize a trusted relative or legal representative through a Power of Attorney (PoA) to complete transactions on their behalf.
• The PoA should be notarized and attested by the Indian Embassy in the NRI’s country of residence.

7. Repatriation of Sale Proceeds

• NRIs can repatriate funds up to $1 million per financial year, subject to tax compliance and RBI regulations.
• If the property was purchased using an NRE account, the proceeds can be repatriated freely, provided all conditions are met.

Best Practices for NRIs Investing in Indian Real Estate

• Consult a real estate lawyer to verify documents and ensure compliance with legal requirements.
• Work with RERA-registered developers to avoid fraudulent transactions.
• Conduct thorough market research and evaluate property location, demand, and future appreciation.
• Keep track of tax obligations, home loan eligibility, and repatriation guidelines.

Conclusion

Investing in Indian real estate as an NRI requires careful planning, legal compliance, and due diligence. Understanding the legal framework, taxation policies, and documentation requirements can help avoid potential risks. At Franch Realty, we assist NRIs in navigating the real estate market in India, ensuring a hassle-free investment experience. If you’re an NRI looking to invest in property, get in touch with us for expert guidance and seamless transactions.