Key RBI Guidelines and Regulations for NRI Property Ownership

1. Permissible Property Types

NRIs are permitted to acquire the following categories of property in India in their own right without the prior permission of RBI:

Residential property (Apartments, Villas, Plots for residential purposes)

Commercial property (Offices, Shops, Commercial Buildings)

2. Restrictions on Certain Property Types

Under FEMA, NRIs are prohibited from directly purchasing:

Agricultural land

Farmhouses

Plantation properties

However, these categories may be acquired through:

Inheritance

Gifts received from a Resident Indian, another NRI, or an OCI, provided the giver is legally permitted to own such property.

3. Payment Mechanism for Property Acquisition

RBI has made it a mandate that the transaction should take place entirely in Indian Rupees (INR) through authorised channels of banking. The accounts and channels through which the transaction should take place are:

NRE (Non-Resident External) Account

NRO (Non-Resident Ordinary) Account

FCNR(B)

Not allowed:

Payment via foreign currency notes

Payment via traveller’s cheques

Payment made directly overseas

All funds must be remitted to India first and then used for the property transaction.

4. Repatriation of Sale Proceeds

RBI allows NRIs to repatriate (transfer abroad) funds from the sale of property in India; however, they have to follow the rules:

4.1 Repatriation of Original Investment

The amount can be repatriated up to the amount for which the property was initially acquired.

The amount should have been remitted from foreign remittance, NRE, or FCNR (B) accounts.

Repatriation of capital is allowed for a maximum of two residential properties.

4.2 Repatriation of Capital Gains

Capital gains from property sales can be repatriated up to USD 1 million per year.

This applies across all properties owned in India.

4.3 Repatriation of Inherited Property

Proceeds from the sale of inherited property may also be repatriated up to USD 1 million per financial year, subject to proper documentation and applicable taxes.

5. Use of Power of Attorney (PoA)

NRIs who are unable to be present in India can authorise a representative through:

General Power of Attorney, or

Special Power of Attorney

Requirements include:

Proper notarization abroad

Attestation by the Indian consulate/embassy

Clear description of authorised rights (signing agreements, executing registration, etc.)

PoA is especially useful for property management, signing sale deeds, or dealing with developers.

6. TDS (Tax Deducted at Source) Compliance

When an NRI sells property:

The buyer must deduct a higher TDS based on the income tax slab applicable to NRIs (20% + surcharge + cess for long-term gains; higher for short-term).

When an NRI buys property:

If the purchase value exceeds ₹50 lakhs, the buyer must deduct 1% TDS under Section 194-IA.

These requirements ensure compliance with income tax regulations.

7. Home Loans for NRIs

RBI allows NRIs to avail home loans from banks and housing finance companies in India. 

Regulations:

Payment of loans in Indian Rupees only

Source of Repayment:

NRI’s NRE/NRO/FCNR(B) accounts

Rental income from property

Remittance for repayment from a close relative

Property acquired through home loans must be a residential/commercial property and not an agricultural property.