How to Invest in Real Estate in India
Non-resident Indians (NRIs), Persons of Indian Origin (PIOs), foreign nationals who are residents of India and foreign companies that have established a business or branch office in India are permitted by the Indian government to purchase real estate. According to the Reserve Bank of India, a foreign national of non-Indian origin residing outside India cannot purchase immovable property in India. However, high-net-worth, non-resident foreign nationals of non-Indian origin can invest in Indian property through India-focused real estate venture capital funds. Individuals can also invest in real estate mutual funds.
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Things You'll Need
- NRE / FCNR (B) / NRO bank account in India or NRI rupee account
- Permanent Account Number (PAN) card
- Stamped transfer deed of Power of Attorney
- Valuation certificate of the property
- Completion certificate
Instructions
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Locate a Seller
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Pick the right builder Locate a reliable builder through research and referrals. Use social networking tools such as LinkedIn and Facebook to gain information. Attend real estate expos by Indian developers held periodically for NRIs and PIOs in large U.S. cities; ethnic publications run ads and often provide sponsorships for such events. Several properties are specifically built for NRIs returning to India. These houses and apartments have Western-style designs such as an open kitchen or community clubhouse.
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Research property prices/valuation Research price, location, and inventory. "Indian Realty News," a free online publication, lists current property values by state and location. You can also purchase in-depth market research reports from Colliers International, Cushman Wakefield, or Jones Lang LaSalle. Request friends and relatives to drive by the builder's past constructions.
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Loan application process If required, apply for a home loan from any commercial bank in India. All major banks have branches globally. Shop around for best rates and deals. Loans made to NRIs should be repaid via India-based channels such as a Non-resident External account (NRE), Non-resident Rupee account (NRO), and Foreign Currency Non-resident account (FCNR). Funds can also be transfered from abroad in the form of inward remittances. Unlike loans offered to residents of India, NRI loans are for a shorter time period and do not cover the full cost of the property. Extensive documentation including visa, passport, bank statements, employment verification, tax returns, and guarantee by a third party (in some cases) are required. Banks require a property valuation certificate prepared by either a real estate agent or official appraiser.
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To minimize risk, hire a local property law firm to verify the authenticity of the title deed and identify possible loopholes in the agreement of the sale contract. Alternately, verify directly with the sub-registrar's office. Preferably, get your property listed as "Freehold" and obtain a written record acknowledging your ownership from the office of the sub-registrar. Obtain a completion certificate from the seller; you may have to ask for it. The buyer must file an IPI 7 form showing proof of purchase with the Reserve Bank of India within 90 days of purchasing the property. Register the sale of agreement under the 1908 Registration Act.
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If you choose to rent out your property, you must have a Permanent Account Number (PAN) card. Taxes on rental income or from sale of property can be calculated and filed online at the Government of India's Income Tax Department website.
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Tips & Warnings
Any promise or guarantee from the seller must be obtained in writing. Ensure that the builder has obtained prior approval for construction from state and municipal agencies.
It is advisable not to grant Power of Attorney to your developer but to nominate a trusted local person (such as a relative) with a Power of Attorney to act on your behalf.
References
Resources
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