NRI Real Estate Investing in India: Rules, Buying Process, Tax, TDS & Repatriation

For many NRIs, buying property in India feels natural. It could be an emotional decision, a long-term plan to return, or simply a way to keep a physical asset back home.

But real estate works very differently from mutual funds or stocks. Returns are optional. Compliance is not.

Most problems NRIs face with property do not arise at the time of buying. They arise years later, when the property is rented, sold, or money needs to be taken abroad.

This article explains NRI real estate investing in India in a clear, practical way, focusing on what actually matters.

Can NRIs Buy Property in India? What’s Allowed and What’s Not

Yes. NRIs are allowed to buy property in India under FEMA rules.

What NRIs can buy

• Residential property (apartments, independent houses)
• Commercial property (offices, shops)

What NRIs cannot buy

• Agricultural land
• Plantation property
• Farmhouses

These restrictions apply irrespective of how long you have stayed abroad. If you inherit restricted property types, different rules may apply, but buying them directly is generally not permitted.

The 3-Account Rule: How Money Must Move for Property Deals

Property transactions for NRIs should be routed through designated NRI accounts.

Accounts typically used

• NRE account: Repatriable, funded using foreign income
• NRO account: Used for Indian income like rent
• FCNR account: Typically used for deposits, not directly for property payments

Rule of thumb: if you want money to go back abroad later, structure the funding correctly on Day 1.

Step-by-Step Buying Process for NRIs

Buying property as an NRI is not complicated, but documentation discipline matters.

Step 1: Shortlist and due diligence

• Verify title and ownership history
• Check approvals and completion certificates
• Avoid relying only on verbal assurances

Step 2: Agreement and payment

• Make payments from NRE or NRO accounts
• Avoid cash payments
• Preserve bank advice and transaction proofs

Step 3: Registration

• Registration can be done via Power of Attorney if you are abroad
• Ensure PoA is properly notarised and accepted locally

Step 4: Preserve documents

Keep these safely for future sale or repatriation requests:

• Sale agreement
• Registered deed
• Bank remittance proofs
• Payment schedule

Home Loans for NRIs: Only What You Need to Know

Many Indian banks offer home loans to NRIs.

Key points

• Loans are typically repaid from NRE or NRO accounts
• Eligibility depends on country of residence and income stability
• Loan structure does not replace compliance checks

A loan does not simplify compliance. It adds another layer, so align account structure before committing.

Rental Income for NRIs: Tax, TDS and Repatriation

Rental income from Indian property is treated as Indian income.

How rent is usually handled

• Rent is generally credited to an NRO account
• TDS can apply on rent paid to NRIs
• Net rent after tax can be repatriated subject to limits and documentation

Ignoring rental compliance can create issues later during sale or remittance.

Selling Property as an NRI: Where Most People Get Stuck

This is the most sensitive stage for NRIs.

Buyer’s TDS obligation

When an NRI sells property, the buyer is legally required to deduct TDS. TDS is usually higher than for resident sellers, and the rate depends on holding period and gain type. The buyer, not the seller, is responsible for deduction.

Lower Deduction Certificate (useful in many cases)

NRIs can apply for a Lower Deduction Certificate if the actual tax liability is expected to be lower than standard TDS. This can reduce cash blockage and avoid long refund timelines.

Repatriation of Property Money: What Can Go Back Abroad and How

Repatriation depends on how the property was funded and how clean the compliance trail is.

What typically decides repatriation ease

• Properties funded using NRE flows usually support simpler repatriation
• NRO-funded transactions follow additional limits and documentation
• Documentation is non-negotiable

Documents commonly asked for

• Purchase proof and sale deed
• Bank statements and payment trail
• Tax payment / TDS proofs
• CA certificate and bank forms (as applicable)

Common Mistakes NRIs Make in Real Estate

• Using resident accounts after becoming an NRI
• Not preserving payment trails and remittance proofs
• Underestimating sale-side TDS planning
• Buying jointly without clarity on repatriation rights and documentation
• Assuming nomination solves ownership and inheritance issues
• Treating Power of Attorney as a replacement for planning

A Simple Checklist Before You Buy or Sell

Before buying

• Confirm the property type is permitted for NRIs
• Decide the funding account (NRE vs NRO)
• Preserve all remittance and payment proofs

While owning (rent)

• Ensure rental income compliance
• Track tax deductions and documentation

Before selling

• Understand buyer’s TDS obligation
• Evaluate Lower Deduction Certificate if cash blockage risk is high
• Organise documents early

Before repatriation request

• Review funding source and compliance trail
• Prepare CA and bank documentation as required
• Expect processing time

Final Takeaway

Real estate can be an emotional and meaningful asset for NRIs. But the outcome improves significantly when accounts are structured correctly, taxes are handled on time, and exit + repatriation are planned early.

Plan the exit on Day 1. That one habit prevents most NRI real estate problems.

Explore the NRI Investing Series

• NRI investing in India: complete guide
• NRE vs NRO vs FCNR explained
• NRI taxation in India
• Repatriation rules for NRIs
• NRI mutual funds & FATCA
• NRI stock investing in India
• Returning to India (RNOR) planning
• Estate planning for NRIs

Disclaimer: This article is for informational purposes only and should not be treated as legal or tax advice. Rules can change and outcomes depend on individual facts. Consult qualified professionals before taking action.