Buying Property in India as a Foreigner: What You Need to Know

Can Foreigners Buy Property in India?

Non-residents of India or foreign nationals are usually not allowed to buy immovable property in India. Such transactions are controlled by the Foreign Exchange Management Act (FEMA), which is controlled by the Reserve Bank of India (RBI). This is how it can be explained:

• Both Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs) have permission to purchase both residential and commercial property in India.
• In India, residential/commercial property cannot be purchased by foreigners of non-Indian origin who are residing abroad.
• The foreigners are not allowed to buy agricultural land, plantation property, or a farmhouse, irrespective of their residency.

Who Is Eligible to Buy Property?

1. NRIs (Non-Resident Indians)

NRIs have almost equivalent property rights in India to Indian citizens. They are capable of buying, inheriting, and giving away residential as well as commercial property without prior permission from the RBI.

2. PIOs (Persons of Indian Origin) and OCIs (Overseas Citizens of India)

Residential and commercial property can equally be purchased by PIOs and OCIs without any restriction. But when they desire to purchase agricultural or plantation land, they need to receive special permission from the government.

3. Foreign Nationals Residing in India

The RBI allows foreigners who reside in India for more than 182 days in the previous financial year to acquire property with its permission. They must be residing in the country with a legitimate long-term visa (not tourist and visitor visas).

Restrictions on Property Types

Foreign purchasers, be it NRI, PIO, or resident foreign nationals, cannot buy:

• Agricultural land
• Farmhouses
• Plantation property

Financial and Legal Considerations

1. Funding the Purchase

• NRIs and PIOs can finance the purchase of any property by remitting from a foreign bank account, inward remittance, or using NRE/NRO/FCNR bank accounts in India.
• It is possible to take loans from Indian banks or financial institutions, but the payment must be received through NRI accounts or inward remittances.

2. Taxation

Foreign purchasers will have to mind:

• Capital Gains Tax: To be paid on the sale of property.
• Property Tax: Charged by local municipal authorities.
• TDS (Tax Deducted at Source): Charged on rent and sale transactions.

3. Registration and Legal Compliance

• Any property deals should be registered at the local office of the sub-registrar.
• Hiring a local lawyer to check the title deed, permission of land use, and history of ownership is a good practice.

Opportunities in Indian Real Estate

The real estate market in India has been promising to investors in the long term due to its level of urbanisation, the development of infrastructure, and the dynamic tech sector in the country. Some of the well-known hotspots are:

• Bengaluru: IT Professionals and rental yields
• Mumbai and Pune: Luxury & commercial property
• Hyderabad & Chennai: Affordability and scope of visibility
• Goa & Kerala: Scenic, touristic-based investments (residency restriction)

Final Thoughts:

Although a foreigner can purchase property in India when falling under specific categories, it must be done through the judicious negotiation of legal systems, eligibility criteria, and taxation commitments. In case of NRIs and OCIs, it is fairly easy. In other cases, joining through indirect investment or joint ventures could be more realistic.