What are the documents required for NRI To buy property in India​?

In today’s world, you will find that lots of people are investing in real estate in India. This is because of city and infrastructural growth. NRIs are also in this group, investing in residential and commercial properties because of good return rates. 

However, NRIs have to submit the proper documents to buy a property in India, so that they can legally own it and keep it safe from any fraud. These official papers play an important role in making sure that the property is valid and that all the laws are followed. Getting a home loan is also easy with the right documents. 

Eligibility Criteria for NRIs

Before we understand how NRIs can buy the property, let’s understand what it means to be one:  

• NRI (Non-Resident Indian): An NRI is an individual who was born in India, living outside India for employment, business or other reasons, usually beyond 182 days in a financial year. 

• PIO (Person of Indian Origin): A foreign citizen with Indian who has Indian ancestors. This excludes citizens of Pakistan, Bangladesh and other certain countries. 

• OCI (Overseas Citizen of India): A person who has been granted permanent residency in India, without citizenship. 

Eligibility to Purchase Different Types of Properties: 

• Residential and Commercial Properties: You can buy these kinds of properties without needing permission from the RBI. 

• Agricultural Land/Plantations/Farmhouses: On the flip side, unless you inherit it from a family member, agricultural land is usually out of buying limits. Make sure that you update the records to say so. 

Documents Required for NRIs to Buy Property in India

Identity Proof: 

• Passport, PIO or OCI Card: 
  • You can get an OCI card by submitting proof of Indian origin, filling out form XIX, and providing documents as required by the Indian Mission, such as address proof, proof of current citizenship and a photo and biometrics. 
  • For a PIO card, provide proof of Indian heritage and visa status in the current country of residence. 

• Aadhar Card: While optional, providing the Aadhar card can aid in a smooth process. 

Financial Documents: 

• Bank Statements: 
  • Open a Non-Residential External (NRE) or Non-Resident Ordinary (NRO) account. They will help you buy the property in India.  
  • Provide your bank statement of at least 6 months. 
  • Income Tax Returns (ITR): Proof of taxes filed in the country of residence, supporting financial credibility. 

Property Related Documents: 

• Title Deed: This document basically confirms that the property is legally owned by the seller, and that they can sell it. 

• Encumbrance Certificates: For verifying that the property has no unsolved disputes. . 

• Sale Agreement: Has all the information about the entire transaction. 

Additional Documents: 

• Power of Attorney (PoA): 
  • Specifies that someone in India is acting on behalf of the NRI. 
  • Must be notarized and assessed by the Indian Consulate in the NRI’s country of residence. 

• No Objection Certificate (NOC): This certificate is a confirmation from the authorities that the property is clear to be purchased or lived in. 

Home Loan Documentation for NRIs

To aid in the property’s purchase, NRIs can take loans from banks in India. Here are some documents required for a home loan for NRI in India: 

• Eligibility Criteria: 
  • Age: Typically between 21 to 60 years. 
  • Income: Minimum Earning thresholds vary by lender and in this case the loan taker’s country of residence. 
  • Employment Stability: A minimum tenure of one year with the current employer is generally mandatory. 

• Required documents required for a home loan for NRI in India: 
  • Employment Contract or Offer Letter: Verifies job stability and income source. 
  • Salary slips: Acts as proof of salary. The provided salary slip should date back six months. 
  • Credit Report: This is required from the country of residence to evaluate your creditworthiness. 

• Financial Statements: 
  • Bank statements of the past six months that show that you regularly earn a good income and have savings. 

• Property Documents: 
  • Agreement to Sell: Confirms that the property purchase has been done. 
  • Allotment Letter: When you buy a newly constructed home, or office space, the developer will issue this to confirm that the property has been booked. 

Legal and Regulatory Considerations

A purchase of property by an NRI in India also means that the legal and regulatory aspects need to be considered, such as: 

• FEMA Guidelines:
  • Governed by Foreign Exchange Management Act (FEMA), an NRI can purchase residential or commercial properties in India without needing approval from the RBI. 
  • Payments must be made via the NRE, NRO or FCNR accounts, or through Indian banking channels. 
  • NRIs cannot transact in foreign currency directly for property purchases. 

• Taxation Aspects:
  • Property Purchase: To finalise the purchase of property by an NRI in India, you will have to pay the stamp duty and registration fees. 
  • Rental Income: This is taxed at 30% TDS. Other cuts, for maintenance and property tax also apply. 
  • Capital Gains Tax: When you sell the property, you will have to pay a tax from the profits you earned. For properties you owned for more than two years, a 20% long-term gains tax is applied. 
  • If you sell it within a year, then short-term gains tax is applied per the relevant slab. 
  • DTAA Benefits: The Double Tax Avoidance Agreement will help reduce your tax liabilities, by saving you from paying the tax two times; in India, and your country of residence. 

Repatriation of Funds

Procedures for Repatriating Rental Income and Sale Proceeds: 

• Rental Income Repatriation:
  • As an NRI property owner, you can return all the rental income you earn from your properties in India to your bank account in your country of residence. 
  • This income should be credited to an NRO account.
  • When you settle the taxes, then the funds can be transferred to an overseas account after submitting Form 15CA (self-declaration) and 15CB (certified by a chartered accountant) 

• Sale Proceeds Repatriation:
  • Proceeds from property sales can be returned under the following conditions: 

• The property was acquired in compliance with FEMA regulations. 
• Repatriation is limited to the amount originally paid using foreign funds. 
• Sale proceeds must be deposited in an NRO account. 
• NRIs can repatriate up to USD 1 million per financial year, including other eligible assets, after completing tax formalities and obtaining a certificate from the chartered accountant. 

RBI Guidelines on Repatriation Limits: 

• NRIs can repatriate:
  • Upto two residential properties, or one commercial property in their lifetime. 
  • Rental income without specific caps, provided all tax rules are complied with. 
  • Inheritance proceeds without limit, subject to proper documentation. 
  • All transactions must occur through Indian banking channels.

Power of Attorney

Why you should have a PoA if you are an NRI buying a property in India: 

• A Power of Attorney is essential as you cannot be physically present in India everytime you want to do a transaction for your property. 
• Having a PoA means that you have a trusted representative who will act on your behalf in case you want to purchase another property, sell the one you own, register a new property, lease it or for managing disputes. 
• A PoA will make the entire process smooth, avoid delays and legal complications. 

Process of Drafting and Registering PoA from Abroad: 

• Drafting the POA:
  • Draft the PoA document specifying the scope of authority; is it a general or specific?
  • Use the usual format, or for a proper PoA talk to a lawyer based in India so that you don’t miss anything. 

• Attestation and Notarization:
  • Get the PoA verified by the Indian Consulate or Embassy in your country of residence. 
  • They also might need to notarize the PoA, to indicate authenticity. 

• Sending the PoA to India:
  • Send the attested PoA to the representative in India. 
  • The representative now has to register the PoA with the sub-registrar’s office in India, and pay the applicable stamp duty. 

Challenges and Solutions: 

Navigating Legal Complexity: 

• Challenge: Understanding legal frameworks like FEMA regulations, RERA and state-specific property laws. 
• Solution: Hire a property lawyer or real estate consultant who knows about NRI-specific legalities. 

Ensuring Clear Property Titles

• Challenge: Verifying the legitimacy of property ownership and encumbrances. 
• Solution: Conducting due diligence by obtaining title deeds, and encumbrance certificates and ensuring that the property complies with zoning laws. 

Managing Property from Abroad

• Challenge: Maintaining, leasing or selling property while living overseas
• Solution:
  • Appoint a reliable PoA.
  • Use professional property management services. 
  • Leverage digital platforms for property monitoring and communication. 

Checklist and Summary

Here is a detailed checklist of documents you need to have to buy a property in India. 

Before the purchase, you need: 

• Identification documents: Passport, OCI, PIO card, Aadhar Card (This is optional) 
• Proof of Indian Origin
• Financial Documents; NRE/NRO account details and income tax returns. 
• Property-related documents: Title Deed, Sale Agreement, Encumbrance Certificate. 

For Loans: 

• Salary slips, credit reports and employment details. 
• Bank statements of the past 6 months. 
• Property documents like the agreement to sell or allotment letter. 

Post Purchase: 

• Registration of property
• Tax Compliance (TDS on rental income and property tax) 
• Repatriation documentation (Forms 15CA and 15CB) 

NRIs can invest freely in residential properties like Ten X Habitat, and commercial properties, but need approval for agricultural land. Proper documentation is critical to avoid any legal and financial issues. FEMA regulations govern property transactions and adherence is mandatory. 
Having a PoA will also relieve you of any tension for your property in India.  

FAQs

1. Can NRIs buy agricultural land in India? 
   No. As an NRI, you can’t buy agricultural land, plantations or farmhouses without the RBI’s approval. The only exception to this rule is if you have inherited the property. 

2. Is an OCI card compulsory for NRIs to buy property in India? 
   No. A valid passport is enough

3. How much money can NRIs repatriate from property sales? 
   Up to $1 million every financial year. 

4. What taxes do NRIs pay on rental income in India? 
   Rental income is subject to a 30% TDS, but any cuts made for property maintenance and taxes helps bring down this amount. 

5. Can NRIs get a home loan in India? 
   Yes, NRIs can obtain home loans from Indian banks to buy a property. Eligibility depends on income, employment stability and financial documentation.