Thursday, December 22, 2016

Can NRI buys properties in India? Flats, Residential Plot, or Commercial Shop?

Yes, Under the exchange control law, NRIs are allowed to buy property in India except for agricultrual land, farm house or any plantation property. This means NRIs can buy flats, bungalows, residential plots, and landed properties, both freehold and on the lease.  NRIs are also allowed to buy commercial properties e.g. shops in India. They can also purchase a residential house which is ready or possession, under construction or available on resale. NRIs can even take NRI home loans for the purchase of a plot of land allotted by a society/development authority.

Btw, here an NRI refers to both NRI and PIO i.e. an Indian citizen residing in abroad and a person of Indian origin, who is not an Indian citizen and doesn't hold an Indian passport. This is because the determination of residential status under exchange control law is different from income tax law.

As per Income tax law and as per FEMA definition, if an Indian citizen stays more than 182 days outside India in a given financial year then he becomes an NRI, but there are some special cases as well. Though, You can easily find the residential status of any Indian living abroad using this NRI residential status flow chart.

Not only NRIs can buy properties in India, they can also take NRI home loans from both public and private sector banks e.g. ICICI, HDFC, SBI, Punjab National Bank, Bank of Baroda, Bank Of India, Axis Bank, DBS Bank, YESBank, Kotak Bank, Federal Bank and so on. They can also take NRI home loans for Non-banking Financial companies (NBFC) e.g. LIC housing finance, Indiabulls, Reliance etc. They are also eligible for income tax benefits which resident Indians are entitled to buying property by taking home loans e.g.

1) The interest on NRI home loan which has been taken for purchase, construction, or repair of a residential property (flat, bungalow, or a landed house) in India is allowed as a tax deduction while computing the income from the property for the relevant financial year.

2) The limit for this deduction is Rs 2 lakh INR for a self-occupied property. However, in the case of let-out property, interest payable on housing loan is deductible from rental income without any limit.

3) Apart from this, the repayment of principal amount against NRI housing loan is also eligible for tax deduction from the gross total income, btw the maximum deduction that can be claimed for repayment of the loan is Rs 1.5 lakh INR, you cannot claim more than that.

So, if you have some additional income in India e.g. from rental income, interest earned on NRO bank fixed deposit, dividend from stock market investment or some sort of royalty, you can use these tax deduction benefit by taking a home loan for your property purchase in India.

Rules for NRIs buying residential properties in India

There is also some specific rules for NRIs buying residential properties in India, particularly with respect to funding and repaying installments of home loans e.g. NRIs can repay their home loan EMIs by following ways:

1) Using Remittance from abroad, you can send money to your NRE saving account using remittance services like Money2India, Remit2India or SBI's e-portal. If you are sending money from Singapore, you can check here for best money transfer services.

Can NRIs buy residential properties in India?

2) You can also pay EMI from any deposit accounts maintained validly in India including Non-resident (Ordinary accounts), also known as NRO accounts.

3) NRIs are also allowed to repay EMIs of their home loans by using rental income derived from the property by specified close relatives

There are many more rules and tax implications related to NRI buying properties in India, taking home loans, selling properties within 3 years of purchase and short term and long term capital gain tax when you sell property in India, which we'll see in coming articles.

In short, Yes, NRIs can buy properties in India but they can only buy residential properties e.g. flat, bungalows or landed houses. They cannot buy farm house, agricultural land or any plantation property. They are also free to buy any under-construction or resale property of their choice.

Non Resident Indians can even fund their property purchase by taking NRI home loans. Almost all Indian public and private sector banks e.g. HDFC, ICICI, Axis Bank, SBI, Bank of Baroda, Federal bank are offering NRI home loans with a very attractive rate. I'll write more about a couple of things which you should consider before taking an NRI home loan in next article.

1 comment:

  1. HDFC Home loans to NRI's, PIO's and OCI's for purchase of residential property in India. Avail property search and home loan for nri advisory services from HDFC.


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