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NRI Investment in India

Can I invest in real estate in India? YES

NO

NO RESTRICTION

YES

Can I acquire agricultural land / plantation property /farm house?

Is there any restriction on the number of residential / commercial properties I can purchase?

Can I acquire immovable property by way of gift / inheritance?

Can I sell / gift my residential / commercial property?

Can I repatriate the sale proceeds from India?

What can be the source of funding?

Can I mortgage my property?

YES (The property can only be commercial or residential in nature. Prior approval required from the RBI (Reserve Bank of India) for citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal and Bhutan)

YES (No prior approval is required from the RBI for loans from authorised dealers in India; approval is required if the loan is from a bank abroad)

Properties can be purchased using inward remittances from anywhere outside of India or through funds maintained in NRI bank accounts in India.

YES but with certain pre-conditions

• Repatriated amount cannot exceed the amount you originally paid for purchase;

• Repatriation of sale proceeds is restricted to a maximum of two properties;

• Repatriating proceeds from residential investments in the form of dividends is not allowed;

• Repatriation limit is US$1 million per �nancial year.

Investment by an NRI in India is always welcomed and the Reserve Bank of India has granted general permission to foreign citizens of Indian Origin (NRIs) whether resident in India or abroad, to purchase immovable property in India. According to this general permission, the NRI needs to �le a Form IPI 7 declaration with the central o�ce of the Reserve Bank of India (RBI) within 90 days of the date of purchase of immovable property or �nal payment of a purchase consideration along with a certi�ed copy of the documents verifying the transaction and a bank certi�cate showing the consideration paid. There is no restriction on the number of properties an NRI can buy in India.

Frequently Asked Questions

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Costs InvolvedBesides purchase considerations, investing in Indian property also attracts a few other costs including:

• Legal costs – When purchasing property, you need to pay charges such as stamp duty, registration charges, legal charges and mortgage related costs such as processing and valuation fees, etc.

• Property Taxes – Yearly property tax needs to be paid. Generally, the property tax on rented property is more than the self-owned properties.

• Brokerage – Generally, there is no brokerage fee if you are buying an under-construction property; however, if you are buying / selling / renting a ready to move in property, you need to pay 2 to 4% as brokerage or solicitor fee.

• Maintenance Cost – Yearly maintenance costs for painting, cleaning, repairs, etc. to maintain the property need to be paid. In addition, an agent may need to be hired to manage and look after the property in your absence.

Taking Out a Loan for Buying PropertyGetting �nancing from �nancial institutions is quite easy in India. For NRI investors, various Indian banks o�er special home loan schemes. Loans can be made against the property being purchased by keeping it with bank as mortgage. The repayment of a loan can be done through inward remittance through a banking channel. The maximum loan to value ratio can be 80%. However, it is advisable to consider a loan-to-value ratio of 60% for the purpose of �nancial planning to avoid any �nancial crunch at the time of purchase. One can take a �xed or �oating rate loan which varies between 9.5 and 12%, depending on the �nancial institution chosen.

Tax Implications

TAXES ON PURCHASING REAL ESTATE

TAXES ON HOLDING REAL ESTATE

APPLICABLE TO PURCHASER / SELLER

STAMP DUTY

Based on market value4%-8% CHARGEABLE ON: All types of property

EXEMPTION: 1%-2% less as rebate if property registered under a woman’s name

CAPITAL GAINS TAX

Based on sales capital gains10%-20% CHARGEABLE ON: Property sold after 3 years

10%-30% CHARGEABLE ON: Property sold within 3 years

EXEMPTION: A Captial gains tax exemption is available if the proceeds are reinvested in another residential property or a government bond held for at least three years.

CHARGEABLE ON: Under Construction property

12.36% on 25% of the total purchase price if property cash is less than 1 corer.

12.36% on 30% of the total purchase price if property cash more than 1 corer or having area above 2,000 Sq.ft.

SERVICE TAX

Based on services rendered by the developer in the course of construction of projects

TAX DEDUCATED AT SOURCEBased on transacted price

1% CHARGEABLE ON: Property sold

TAX ON RENTAL INCOME

Based on taxable rental incomeAS PER THE INDIVIDUAL TAX SLAB WHICH RANGE FROM 10%-30% AS PER INCOME

CHARGEABLE ON: Second property even if it is not rented out

PROPERTY TAXBased on annual rentTOGETHER WITH MUNICIPAL TAX

PAYABLE BY OWNER

For Residential Services, please contact: Poonam Mahtani National Director I email: poonam.mahtani@colliers.com

For Research related queries, please contact: Surabhi Arora MRICS

Associate Director I email: surabhi.arora@colliers.com

Diclamier: This document has been prepared by Colliers International for general information only. Colliers International does not guarantee warrant or represent that the information contained in this document is correct. Any interested party should undertake their own enquiries as to the accuracy of the information. Colliers International excludes unequivocally all inferred or implied terms, conditions and warranties arising out of this document and excludes all liability for loss and damage arising directly or indirectly there-from.

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