Real Estate Faqs > NRI/PIO   

How to invest in Indian Real Estate?

Persons of India Origin (PIO) despite being foreign citizens can buy and sell properties in India without prior approval of the Reserve Bank of India. When it comes to supply and demand controlling prices, the supply of housing in India has a long way to go to meet demands. Property purchase in India is definitely something to look at. The cost of housing appears to be shooting up in India steadily. Take a look at the cost of hotel accommodation in India today. A charge of Rupees five thousand a day does not even get you three star hotel accommodation in most cities. If you are an Nri who often visits India for pleasure or business, then purchasing a flat in India may be something worth looking into. Agricultural Land – Farm House – Plantation Property in India Foreign citizens of Indian origin (PIO) can acquire agricultural land, farm house or plantation property in India without the approval of the Reserve Bank of India ONLY by way of inheritance. Foreign citizens of non-Indian origin however, cannot acquire agricultural property without prior approval of the Reserve

• NRI’s can acquire any immovable property in India except agricultural land, plantations or farm houses.
• Payment must be made from funds remitted from abroad by proper banking channels or from legally held NRI accounts in India to which money has been deposit from foreign earnings.
• NRI’s may sell any immovable property they own in India.
• NRI’s who already own agricultural land, plantation or farm house may dispose these by way of gift or sale to a resident person who is a citizen of India.
• Rental income can be remitted outside India after any applicable taxes have been paid

What is "FERA" ?

Foreign Exchange Regulation Act (FERA) An act to regulate certain payments dealing in foreign exchange, securities, the import & export of currency and acquisition of immovable property by foreigners. Under Section 31 (1) of the Foreign Exchange Regulation Act (FERA) of 1973, It is mandatory for foreign corporations, which are not incorporated in India to obtain permission from the Reserve Bank Of India (RBI) to acquire, hold, transfer or dispose off in any manner (expect by way of lease for a period not exceeding five years) any immovable property in India.

What is a Clear title ?

A title that is free of liens or legal questions as to ownership of the property

Verification of property documents by an advocate

What is a survey ?

A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features

Can foreign citizens of Indian origin acquire commercial properties in India?

Yes. Under the general permission granted by Reserve Bank properties other than agricultural land/farm house/plantation property can be acquired by foreign citizens of Indian origin provided the purchase consideration is met either out of inward remittances in foreign exchange through normal banking channels or out of funds from the purchaser's NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of Reserve Bank in from IPI 7 within period of 90 days from the date of purchase of the property/final payment of purchase consideration

Do foreign citizens of Indian origin require permission of Reserve Bank to purchase immovable property in India for their residential use?

Yes. However, Reserve Bank has granted general permission to foreign citizens of Indian origin whether resident in India or Abroad, to purchase immovable property in India for their bonafide residential purpose. They are therefore, not required to obtain separate permission of Reserve Bank.

Purchase of Immovable Property in India by Foreign Citizens of Non-Indian origin/Foreign Companies

Foreign citizens of Non-Indian origin (whether resident in India or not) and foreign companies including trusts, societies and associations incorporated/ registered abroad will be permitted by Reserve Bank, on application, to acquire immovable property in India, provided the following conditions are satisfied.
The property to be purchased is for residential use only.

The consideration for purchase of the property is met out of foreign exchange remitted from abroad in any convertible currency through normal banking channels

Income accruing by way of rent from the property purchased, or the sale proceeds of such property/income arising out of investment of such sale proceeds at any future date shall be credited only to the Ordinary Non-resident Rupee (NRE) account of the non-resident purchaser.

Applications for necessary permission for purchase of immovable property in India should be made in form IPI 1 together with the documents indicated therein to the Chief General Manager, Exchange Control Department, (Foreign Investment Division-III), Reserve Bank of India, Central Office, Mumbai 400 001.

What is fema?

The Foreign Exchange Management Act, 1999 (FEMA) is an Act of the Parliament of India "to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India"

What are the Tax Benefits applicable to Non-Resident Indians?

No tax benefits are available for NRI customers unless you file returns and thereby become eligible to avail of the tax benefits as mentioned under Home Loans.

The rupee loan availed by NRI for purchase of residential accommodation was repaid either by inward remittance or by debit to NRE / FCNR (B) account can the sale proceeds of such property be repatriated ?

Yes. Repayment of loan in foreign exchange is treated as equivalent to the foreign exchange received for purchase of residential accommodation.

Is there any lock in period for sale of residential / commercial property purchased out of inward remittance / debit to NRE / FCNR (B) account ?

No lock in period is applicable for sale of such property.

Into which account the sale proceeds of residential / commercial property received by way of gift by NRI / PIO can be credited ?

The sale proceeds of residential / commercial property received by way of gift by NRI / PIO should be credited to NRO account only.

Can NRI / PIO rent out the residential / commercial property purchased out of foreign exchange / rupee funds, if not required for immediate use ?

Yes. Rent received, being current income may be credited to NRO / NRE account or remitted abroad.

What is the eligibility for obtaining NRI Home Loans?

Your eligibility is calculated in the same way as it is calculated for resident Indians. More emphasis is laid on the following criteria in the appraisal of a NRI case:
• Qualifications - the NRI applicant has to be graduate
• Current job profile & Past experience
• Probability of continuing abroad for the loan tenure
• Probability of servicing the loan with an extended tenure in case you have to return to India.

Under the general permission available what is the mode of payment for purchase of residential / commercial property in India by NRI / PIO ?

Under the general permission available NRI / PIO may purchase residential / commercial property in India out of funds remitted to India through normal banking channel or funds held in his NRE / FCNR (B) / NRO account. No consideration shall be paid outside India.

Under the general permission available to whom can NRI / PIO transfer by way of sale his agricultural land / plantation property / farm house in India?

Under the general permission available NRI / PIO may transfer by way of sale his agricultural land / plantation / farm house in India to a person resident in India who is a citizen of India.

Can a person resident outside India(i.e,.a NRI or a PIO or a foreign national of non-Indian origin)acquire agricultural land/plantation property/farm house in India by way of purchase ?

A person resident outside India cannot acquire by way of purchase agricultural land / plantation property / farm house in India.

Can NRI / PIO acquire residential / commercial property by way of gift under the general permission available ?

Yes. Under the general permission available NRI / PIO may acquire residential / commercial property by way of gift from a person resident in India or a NRI or a PIO.

Can a foreign national of non-Indian origin resident outside India acquire residential / commercial property in India by way of gift ?

Under section 2(ze) of the Foreign Exchange Management Act, 1999 `transfer' includes among others, `gift'. Therefore, a foreign national of non-Indian origin resident outside India cannot acquire residential / commercial property in India by way of gift.

Where are the terms a `person resident in India' and a `person resident outside India' defined ?

Section 2 (v) and Section 2 (w) of the FEMA, 1999 defines `person resident in India' and a `person resident outside India' respectively.

Does Reserve Bank determine the residential status of a person for the purpose of acquisition of immovable property in India ?

Under FEMA residential status is determined by operation of law. The onus is on an individual to prove his / her residential status if question by any other authority.

NRIs Renting Property in India – Types of rental agreements in India ?

There are normally two types of agreements that are used when renting property. • Rental Lease Agreement • Leave and license agreement While both these types of agreements appear to be similar with the purpose of renting property, there is a considerable difference when legal aspects are taken into consideration. In simple terms, in rental lease agreements, there is, considered to be a transfer of interest from a lessor to a lessee. On the other hand a Leave and License agreement does not create any interest in the premises in favor of the licensee. Leave and license agreements offer a higher form of protection for landlords against tenants. In general, rent control laws do not apply to leave and license agreements. Eviction, under leave and license is governed by the Easements Act. NRI’s and PIO’s who wish to rent out their properties should consider using a Leave and License agreement. A comparison chart showing the difference between Lease Agreement and Leave & License is shown on the next page.

Purchase of Agricultural Land in India by NRIs – Foreigners

Foreigners cannot buy agricultural land in India. This is applicable to all of India. No state in India allows foreigners to buy agricultural land. • Nri’s cannot buy agricultural land in India. Yes! all over India as above. Approval is required from the Reserve bank of India which one can assume is not easily available and this would depend on individual circumstances. • Furthermore, some State governments in India have rules that allow only farmers to buy agricultural land in their State and this restricts even Indian citizens from buying agricultural land. • OCI holders residing in India by virtue of their OCI status are still foreign citizens and should realize that OCI grants them visa for life to stay in India but does not give them Indian citizenship. They still hold foreign passports • NRIs and Foreign citizens of Indian origin cannot acquire agricultural land by way of gift. They can only acquire agricultural land by inheritance

What are the tips for NRI’s buying property in India ?

NRI's should be aware that courts are slow in India and cases that involve property can take decades to settle. Hence it is better to be careful to check and verify documents before purchasing property in India Most registration offices for property in India are not computerized yet. Records are kept in manual registers and it is all the more necessary to get all required documents and keep them with care. Tips for purchasing a flat or vacant land in India. 1. Builder’s reputation should be checked out. What other projects has this builder built? Don’t just look at glossy brochures and be satisfied. 2. See the documentation for the lands on which to flats are to be built. There should be a proper certificate issued by a lawyer with a standing of at least three years. Documents usually name the parties from whom the land has been acquired etc. ( It is always better to get your own lawyer to advise you on such matters.) 3. Check that the plans provided by the builder have been approved by the local government authorities. 4. What happens if project is delayed? It is not uncommon for builders to raise prices later if market prices go up. So ask questions before giving deposit. 5. Get promises in writing as verbal promises are not worthless when there is a dispute. 6. Take steps to make the builder aware that you will be provided with a completion certificate that has been granted by the local authorities BEFORE possession. 7. Get clarification in writing on how builder will hand over after construction is completed. Such as cooperative society etc. This may not seem important to many purchasers when buying but can prove to be a costly affair later.

What is the checklist for buying property in India?

NRI’s and PIO’s who are contemplating on buying a residential property in India should first and foremost determine the purpose of such a purchase. Determine whether you will eventually want to live there, or if you would wish to have a place in India for short term visits that you and your friends can use. Here are a few tips when buying property in India: 1. Land should have a clear title, check with the office of the Sub Registrar 2. Insist on a completion certificate and a map with the sale deed 3. If purchasing land. Establish how the land was acquired by the seller 4. Before buying vacant land a copy of plan approval from the local authorities should be obtained. The seller should be able to provide this. It is up to you to verify these documents 5. Zoning was not a problem several years back. However things have changed now. Don’t buy residential property for commercial use unless the plans are approved. It is not uncommon for the municipal authorities to demolish structures after they have been built and sometimes years after they have been built 6. Be very careful when buying property from sellers who have a power of attorney status to sell the property. Ensure that title is clear and the owner is the one actually selling the property and there are no legal disputes for ownership of the property 7. Get the Agreement of Sale registered as per Registration Act 1908 8. When buying re-sale properties, don't rush to close deal if price is too low as per market standard. Make proper inquires. Ensure that the property is build legally and abides by all building codes and laws of the municipality and state. 9. When buying a new property from a builder it is important that the builders reputation be checked. Previous developments, Whether delivery is on time etc. are things that can tell you a lot about a builder in India. Even your bank in India should be able to provide information about new housing complexes. If banks are hesitant in approving loans for a project, this should be a red flag. 10. When buying from builders, get everything is writing. Read the contract carefully and delete what you don't like. Several builders publish great brochures but many times don't provide all those amenities that they mention initially. Some time they even increase prices after you buy as they may have some clause in the paperwork that you signed that allows them to do so. Check and recheck sale agreement before buying. 11. Maintenance charges is a big problem these days in India. Some builders will take a one time maintenance charge and say the monthly maintenance will be paid from the interest of the deposited money. Turns out at a later date that they still demand more monthly fees for maintenance. 12. Don't pay cash for any property purchase. Make payments only by legal banking channels. This will help you avoid problems and even repatriate your money when you decide to sell your property in India.

Can Residential / Commercial property be mortgaged by NRI/ PIO?

NRI / PIO can mortgage a Residential / Commercial property to: An Authorised Dealer / the housing finance institution in India without the approval of Reserve Bank A Bank abroad, with the prior approval of the Reserve Bank.

Can an NRI sell inherited property?

In case the property (irrespective of its nature) was acquired or inherited by you (the overseas Indian or NRI) when you were a resident of India, you can sell or build on the property without the approval of the Reserve Bank of India. However, if you wish to sell it, you must be a resident citizen of India.

Are NRI/PIO/OCI eligible for Housing loans to buy property from any Indian Bank?

An authorised dealer or a housing finance institution in India approved by the National Housing Bank may provide housing loan to a non-resident Indian or a person of Indian origin residing outside India. For acquisition of a residential accommodation in India, subject to the following conditions, namely: The quantum of loans, margin money and the period of repayment shall be at par with those applicable to housing finance provided to a person residing in India. b) The loan amount shall not be credited to Non-resident External (NRE)/Foreign Currency Non-resident (FCNR)/Non-resident non-repatriable (NRNR) account of the borrower. (c) The loan shall be fully secured by equitable mortgage by deposit of title deal of the property proposed to be acquired, and if necessary, also be lien on the borrower’s other assets in India. (d) The installment of loan, interest and other charges, if any, shall be paid by the borrower by remittances from outside India through normal banking channels , i.e., NRO/NRE account in India or out of rental income derived from renting out the property acquired by utilization of the loan or by any relative of the borrower in India by crediting the borrower’s loan account through the bank account of such relative (The word ‘relative’ means ‘relative’ as defined in section 6 of the Companies Act, 1956.) (e) The rate of interest on the loan shall conform to the directives issued by the Reserve Bank of India or, as the case may be, the National Housing Bank. f) A maximum of 80 per cent amount is financed by the financial institution. The rest should be given by the NRI. g) The NRI has to repay his principal amount as well as interest part from that similar channel only.

Can NRI invest in immovable properties on repatriation basis ?

Yes, Repatriation benefit is available for 2 residential houses. The purchase should be out of funds remitted from aboard or out of NRE/FCNR a/cs, in accordance with the provisions of FERA/FEMA.

What are the documents that have to submitted to open an NRE Account?

Completed application form signed and attested by your Banker/Embassy of India/Public Notary or any person known to the bank must be accompanied with: (a) Copy of Passport ((b) Copy of Visa (c) Latest Overseas Bank statement in original, latest overseas telephone/electricity bill in original as residential proof.

What are the types of account in NRE account?

Saving, Current, Term deposits and Recurring deposits.

Is there any restriction on the number of property units that an NRI can acquire?

There is no restriction as to the number of residential or commercial property an NRI can acquire.

Do NRI’s require permission from RBI to acquire property in India?

RBI has issued a notification granting a general permission to NRI's for purchase of certain immovable properties in India without obtaining any specific permission from RBI.

How can NRI’s invest in Real Estate?

According to the regulations of FEMA and RBI, an NRI is allowed to do the following investments in property: Any immovable property can be purchased by an NRI in India other than any agricultural land, farm house and plantation property. He can get any immovable property as mentioned above by gift from Indian resident, Indian citizen residing outside India or person of Indian origin. He can also obtain any property by the way of inheritance. He can transfer immovable property to any resident of India by sale. He can transfer any agricultural land, farm house or plantation land to any resident of India by gift. He can also transfer his residential or commercial property by means of gift to any person either residing in India or abroad or person of Indian origin.

Who is a PIO?

A citizen of a foreign country (other than a citizen of Bangladesh or Pakistan) is a PIO If (a) he/ she at any time held an Indian passport; OR (b) he/ she or either of his/ her parents or any of his/ her grandparents was a citizen of India or (c) spouse (not being a citizen of Bangladesh or Pakistan) of an Indian citizen or (a) or (b) above

Who is an NRI?

An NRI is an Indian citizen who stays outside India: (a) for purposes of carrying out employment or any business or vocation; (b) under circumstances indicating an intention to stay outside India for an uncertain duration (c) any Indian citizen deputed outside India for a temporary period in connection with employment.

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