An NRI or Person of Indian Origin (PIO) can own both residential as well as commercial properties in India and there is no restriction on the number of properties you can buy. However, you cannot purchase any agricultural land, farm house and plantation property. You can have ownership of such property only if they've been gifted or inherited. It should be kept in mind that the monetary transactions, used in these investments should be strictly in Indian National Rupees (INR), through proper channel.
Funding the Purchase: It is advised to get the papers verified by a lawyer before going ahead with the transactions. One should properly check the title papers of the property, especially if it is inherited or jointly held, and take a bank release in case it was at any point of time under mortgage. Also, should take a no dues certificate from the seller at the time of purchase to ensure there is no water, electricity or any other pending bills with the authorities. For new constructions, land title should be clear and the builder should have taken all approvals and permits from the civic authorities in terms of construction. Also, education qualification and profession play a role in deciding your loan eligibility. Like, only graduate NRIs can avail home loans in India. According to RBI norms, a maximum of 80% of the value of property can be funded by a financial institution. Rest has to come from the NRI's personal resources. Indian financial institutions give rupee loans and so the same needs to be repaid in rupees only.
"Another option NRIs can use is to get funding overseas where interest rates are lower and is a good idea especially if you are still overseas and have income accruing there," says Anil Rego, CEO and Founder, Right Horizons, a Bangalore-based financial planning firm. Since all transactions must happen through the banking channel, repayment has to be done by inward remittances. You can directly get the money remitted from NRO/NRE account in India or issue post-dated cheques or Electronic Clearance Service (ECS) from your NRE, NRO or Foreign Currency Non Resident (FCNR) account.
In case you let out the property you can use the rent to repay the loan as well. Cheques issued from a relative's local account can also be used to make the loan payments.
Passing the PoA: If you are buying an under-construction property, your developer may ask for a power of attorney(PoA) favouring them. This is not unusual and would make documentation work slightly easier and quicker. A PoA can be given to execute any contracts, deeds as well as mortgage, lease or even sell. So make sure the kind of authority you are giving to the person through the PoA. Just get it worded properly by a professional lawyer you trust. Also, if and when you want to dispose the property, it is a good idea to have a PoA to be a resident India who may be able to act on your behalf to complete formalities such as registration, possession, execution of agreement of sale, etc.
Regulations on Sale of Property by NRIs: Under the FEMA rules, if you are an NRI, you can sell any residential or commercial property you have bought or inherited to anyone you want. If you have any inherited agricultural property, plantation or farm house, you have to search for a resident Indian to buy it. However, you are allowed to gift them to another NRI or the person of Indian origin. There are some specific RBI guidelines on the repatriation of sale proceeds which need to be adhered to. You need to decide on whether you want money as repatriateble or not. "If you want to repatriate, it needs to come in foreign currency from an overseas account, NRE or FCNR account. One can repatriate up to the amount invested in the property," says Rego. "The other condition is that repatriation cannot exceed the foreign exchange amount paid for purchase of property through banking channels. Refund of application money, bayana, advance on cancellation has no limitations," says Sudhir Kaushik, co-founder and CFO of Taxspanner Also, it must be noted that an NRI cannot repatriate proceeds of more than two properties.
Tax implications :A property is also a good tax saving tool for both residents and non-residents. The benefits for a non-residential Indian (NRI) are very similar to the tax benefits of a resident Indian. An NRI is entitled to all tax benefits related to purchase of property that a resident Indian is. So, you can claim a Rs 1 lakh deduction under 80C.