NRI Guide to Buying Property in India: FEMA Rules, Financing, Tax, and RERA Protection

Every year, thousands of NRIs buy property back home — a flat for parents, an investment apartment, a future retirement base. The process runs on different rails: FEMA instead of resident rules, special tax withholding, repatriation limits, and the challenge of doing it all from another continent. This guide covers the rails.

Who can buy what: the FEMA eligibility rules

Under FEMA (the Foreign Exchange Management Act), an NRI — an Indian citizen residing outside India — and an OCI cardholder (Overseas Citizen of India, which now includes erstwhile PIO cardholders after the 2015 merger) may purchase residential and commercial property in India with no limit on the number of properties.

The hard boundary: NRIs and OCIs cannot buy agricultural land, plantation property, or farmhouses. The only exceptions are property inherited, or agricultural land acquired while the person was still a resident. If a "great deal" on farmland is pitched to you from abroad, it describes a transaction you are not legally permitted to make — walk away regardless of the promised returns.

Note that FEMA's definition of NRI differs from the Income Tax Act's 182-day residency test. For property purposes, what matters is your residential status under FEMA at the time of the transaction — if in doubt, get a FEMA-specialist opinion before signing.

How payment must happen

This is where NRI transactions most often go wrong, so read carefully:

• Payment must come through normal banking channels — via your NRE, NRO, or FCNR account, or as foreign inward remittance through proper banking channels.
• Cash payments, traveller's cheques, and informal hawala-style transfers are not permitted and can create FEMA violations that surface years later during repatriation or tax scrutiny.
• Keep a clean paper trail: every rupee of the purchase consideration should be traceable to a compliant source. Your future self, applying for repatriation, will thank you.

Financing: home loans for NRIs

Indian banks and housing finance companies do lend to NRIs, typically with these conditions:

• Eligibility: salaried or self-employed NRIs with stable overseas income; most lenders want a minimum overseas work history (commonly 1–2 years) and a maximum loan tenure that ends before a set age.
• Repayment: EMIs must be serviced through your NRE/NRO account or via foreign remittance — lenders verify this.
• Power of attorney: since you may not be present for every step, lenders and registrars accept a registered, specific power of attorney appointing someone in India to act for you. Make it transaction-specific (property details named), not a sweeping general POA, and register it properly — an unregistered POA is a common source of disputes.
• Co-applicant: adding a resident Indian co-applicant (spouse, parent) is common and often improves terms.

Buying remotely without getting burned

Distance magnifies every standard property risk. Your remote-buying protocol:

1. Verify RERA registration yourself on the state portal (MahaRERA, TS-RERA, Karnataka RERA, etc.) — registration status, possession date, and approvals are all public. Never delegate this to the seller's agent alone.
2. Get an independent lawyer's title check — link documents, encumbrance certificate, and approval chain — before any token amount.
3. Get an independent site visit through someone you trust — not the developer's sales team — plus a video walkthrough. Check the actual construction stage against the RERA portal's quarterly updates.
4. Read the agreement to sell for the carpet area, payment schedule linked to construction stages, possession date, and penalty clauses — the same clauses resident buyers should read, with zero shortcuts because you're far away.
5. Never pay token amounts to personal accounts on the basis of a phone promise. Token goes against a written receipt to the developer's or seller's proper account.

Tax implications you must plan for

Rental income is taxable in India. Your tenant must deduct TDS at 30% (plus applicable surcharge and cess) under Section 195 before paying you rent — this is the tenant's legal obligation, and many individual tenants don't know it. Factor the withholding into your yield math and claim credit when filing.

Capital gains on sale:

• Short-term (held 24 months or less): taxed at your income slab rates.
• Long-term (held over 24 months): taxed at 12.5% without indexation. Properties purchased before 23 July 2024 may alternatively be taxed at 20% with indexation — compute both and use whichever the law allows at the time of your sale, since rules evolve.

TDS when you sell: the buyer must deduct TDS under Section 195 (at the applicable capital-gains rate, not the 1% resident rate) — warn your buyer early, because resident buyers often don't know this and deals stall over it.

Filing: you will generally need to file an Indian income tax return, and DTAA provisions with your country of residence may give credit for taxes paid in India. A cross-border tax advisor pays for itself here.

Repatriation: getting your money back out

Sale proceeds (and rental income, within limits) can be repatriated subject to conditions:

• Repatriation is capped at USD 1 million per financial year for NRIs, covering sale proceeds of property.
• You need a Chartered Accountant's certificate (Form 15CB) and the associated Form 15CA filing, confirming taxes have been paid or provided for.
• The property must originally have been purchased in compliance with FEMA payment rules — which is exactly why the clean paper trail from the purchase stage matters.
• Funds must move through your NRE/NRO accounts via banking channels, with FIRC documentation where applicable.

Plan the repatriation paperwork alongside the sale, not after it — buyers disburse, and then the money sits while certificates are arranged.

Your RERA protections as an NRI

RERA does not distinguish between resident and NRI buyers. You get the same protections:

• The right to buy only in RERA-registered projects with verifiable timelines.
• The 70% escrow rule — most of your payments sit in a monitored escrow account usable only for that project.
• Carpet-area-based pricing and the right to the exact area promised.
• The right to file complaints with the state RERA authority — increasingly doable online, including from abroad.

An NRI who verifies on the RERA portal, uses a specific registered POA, pays through banking channels, and plans for TDS and repatriation upfront faces no disadvantage versus a resident buyer. Distance only hurts when it becomes an excuse to skip verification.

Common NRI mistakes to avoid

• Buying agricultural land or farmhouse plots you are not permitted to own.
• Paying through non-banking channels and destroying your repatriation eligibility.
• Granting a vague, general POA instead of a transaction-specific registered one.
• Ignoring the tenant's 30% TDS obligation on rent — then discovering the compliance gap at filing time.
• Skipping the RERA portal check because "a relative recommended the builder."

Buy like you're next door: verify everything yourself, keep every document, and let the rules work for you. Distance is a logistics problem, not a diligence exemption.

Exploring from abroad? Browse RERA-verified listings on RERA Community — registration details on every project profile, so your verification starts before your flight lands.