Saving Mantra Blog: Step-by-Step Process for Buying Property for NRI in India
Investing in Indian real estate is a popular choice for NRIs to secure long-term wealth, rental income, or retirement plans. However, purchasing property in India requires careful adherence to RBI, FEMA, and legal regulations.
This Saving Mantra guide explains the step-by-step process for NRIs to buy property in India, including eligibility, documentation, financing, taxation, and legal compliance.
✔ Step 1: Check NRI Eligibility
NRIs and Persons of Indian Origin (PIO) can purchase:
- Residential property (apartments, houses, villas)
- Commercial property (office, shops)
Restrictions:
- NRIs cannot buy agricultural land, plantation land, or farmhouses in India without special RBI permission.
✔ Step 2: Determine Budget and Location
- Decide on the city and type of property (residential vs. commercial)
- Research property prices, legal status, amenities, and resale potential
- Consider proximity to workplaces, schools, and hospitals if intending to stay in India
✔ Step 3: Open NRE/NRO Bank Account
- Required for property transactions
- NRE Account: Repatriable funds for purchase
- NRO Account: Non-repatriable, used for income earned in India
- Funds for property transfer must flow through these accounts for RBI compliance
✔ Step 4: Obtain PAN Card
- Mandatory for buying property in India
- Required for property registration, tax deductions, and sale/purchase transactions
✔ Step 5: Conduct Property Due Diligence
Before buying:
- Check title deed, encumbrance certificate, property approvals, and legal clearances
- Ensure no litigation or pending dues
- Verify RERA registration (if applicable) for residential projects
- Review builder agreements carefully
✔ Step 6: Finance Options for NRIs
- NRIs can avail home loans from Indian banks for residential property
- Loan amount depends on NRI’s income, credit score, and property value
- Banks may require:
- Passport and visa
- PAN card
- Overseas address proof
- NRE/NRO account proof
- Income proof
✔ Step 7: Make Offer and Execute Sale Agreement
- Negotiate price and payment terms with the seller
- Sign Sale Agreement / Agreement to Sell
- Pay advance amount (usually 10–20% of property value)
- In
- Total price, payment schedule
- Possession date
- Builder/seller obligations
- Penalty clauses
✔ Step 8: Property Registration
- Required by State Registration Authority
- Documents required:
- Sale deed
- PAN of buyer/seller
- Passport/OCI card for NRI
- Payment receipts
- NRE/NRO account details for fund transfer
- Stamp duty and registration fees vary by state (typically 5–10%)
- Registration ensures legal ownership transfer
✔ Step 9: Compliance with RBI/FEMA Rules
- Fund transfer through NRE/NRO accounts only
- No cash payments allowed above ₹2 lakh
- Repatriation of property sale proceeds:
- Residential property: Up to USD 1 million per financial year
- Must comply with FEMA guidelines
✔ Step 10: Taxation on Property
- TDS on property purchase: 1% for sale of property > ₹50 lakhs (if seller is resident)
- Rental income: Taxed under Indian Income Tax
- Capital gains tax: On resale of property
- Consider Double Taxation Avoidance Agreement (DTAA) if paying tax abroad
✔ Step 11: Property Management
- Hire a local property manager for maintenance and rental collection
- Pay municipal taxes, utility bills, and society charges
- Keep records for income tax and repatriation purposes
Conclusion
Buying property in India as an NRI is a rewarding investment if done carefully. By following the step-by-step process—account setup, due diligence, legal compliance, RBI rules, and taxation—NRIs can safely invest and enjoy returns while ensuring full regulatory compliance.
Disclaimer
This blog is for informational purposes only and does not constitute legal, tax, or financial advice. Property laws, RBI/FEMA rules, and taxation may change. NRIs should consult legal and tax professionals before buying property in India.