The Ultimate Guide To NRI Investments In Indian Real Estate

Real estate investment in India by NRIs has seen an upward trend owing to promising returns, a strengthening economy, and favourable government policies. This guide explores everything NRIs need to know – from regulations and financing options to smart investment tips – to help build a profitable Indian property portfolio.

Benefits of Investing in Indian Real Estate

High ROI

Mumbai witnessed the maximum increase in prices of high-end residential properties among major Indian cities in the first quarter (January to March) of 2024. Prices rose by 11.5% compared to the same period last year.

Diversification

Real estate has a low correlation to equities and balances portfolio risk, which is especially beneficial for NRIs with concentration risk in foreign stocks.

Emotional Connection

For many NRIs, owning a property back home is about more than just financial returns—it fulfils an emotional need to maintain connections with one’s roots. For example, many NRIs invest in projects by trusted developers like Piramal Realty that build high-quality homes in locations they are emotionally attached to.

Key Regulations and Legalities

FEMA Guidelines

• NRIs and PIOs can purchase residential and commercial property in India without prior approval from RBI. The number of properties that can be acquired is unlimited.
• The only condition is that payment has to be made through normal banking channels via NRI accounts. Cash payment is not permitted.
• Agricultural land, farmhouses and plantation property cannot be purchased by NRIs/PIOs.
• Payment for purchase has to be made in Indian Rupees through authorised banking channels.
• The sale proceeds can be fully repatriated outside India if the property is purchased with funds from the NRE account. However, repatriation is restricted to a maximum of two residential properties.

Documentation

• Passport Copy: NRIs must provide a self-attested copy of their passports as proof of citizenship. If the NRI’s address is mentioned on the passport, it also serves as proof of overseas address.
• Visa Copy: For PIO/OCI card holders, a copy of the valid visa that allows the holder to purchase immovable property in India is required. This establishes the buyer’s NRI/PIO status for the property purchase transaction.
• Overseas Address Proof: A copy of any document mentioning your overseas residential address, such as a driver’s license, utility bill, or bank statement, is required. If your overseas address is not mentioned on your passport, this additional address proof will be needed.
• FIRC: Funds Transfer Certificate: NRI buyers must provide a FIRC from their bank abroad confirming the inward remittance of funds used to purchase the property. This shows that the source of funds is legal overseas income and helps determine eligibility for repatriation benefits.
• NOC from Existing Lender: If taking a home loan to finance a property purchase in India, NRIs need a No Objection Certificate (NOC) from an existing lender overseas, not object to additional borrowing.

Financing Options

Home Loans

Indian banks and housing finance companies offer specially designed home loans for NRIs to finance up to 80% of the property value under the NRI loan scheme. The maximum loan amount can be Rs.2 crores depending on eligibility and the property type. Both ready-possession and under-construction properties can be financed under this scheme.

The interest rates start quite competitively from 7% to 7.5% per annum. This makes loans affordable for NRIs compared to mortgage rates in many foreign countries. The interest rate would vary based on individual credit profile, income stability, loan tenure, property type, etc.

Eligibility Criteria

NRIs need to fulfil the following critical criteria to avail of home loans –

Down Payment Requirement

• NRIs need to arrange between 10-25% of the total property value as a minimum down payment from their sources to be eligible for a home loan
• The remaining 75-90% property cost will be financed through the loan, depending on lender loan-to-value ratio norms

Income Eligibility

• For NRIs in Gulf Cooperation Council (GCC) countries – The minimum monthly income required is AED 6,000 (Arab Emirates Dirham)
• For NRIs in the USA, UK, Canada, etc. – The minimum income level needed is USD 3,500 per month
• For Merchant Navy professionals – Minimum of USD 2,500 per month gross salary

Job Stability Clause

• NRIs should have been working with their current employer for at least 6 months
• Additionally, total years of work experience should be a minimum 2 years to demonstrate income and employment stability

Credit Score Parameters

• A good credit score in the range of 650-700 is the minimum benchmark set by most lenders
• Some banks may be willing to lend for scores above 650; others may need a 675+ score for loan approval

Age of the Applicant

• Minimum age is 21 years
• The maximum age limit is between 60-65 years in most cases
• A few lenders consider applications until 70 years of age based on good health and repayment capacity

Property Type Condition

• The loan has to be for the purchase of residential property for self-occupation
• Banks finance ready possession, under-construction or renovation projects meeting specific criteria

Indian real estate offers profitable investment opportunities for NRIs seeking diversification and high ROI. You can make sound investment decisions by carefully understanding regulations and evaluating all parameters. Top developers like Piramal Realty are pioneering in transforming Mumbai’s skyline with meticulously crafted luxury residential projects that elevate living experiences. Considering the long-term capital appreciation and income generation prospects, Indian real estate deserves a place in your global portfolio.

Piramal Realty strives to create spaces that significantly improve residents’ quality of life by setting gold standards in customer-centricity, architectural design, quality, and safety. Some of their flagship developments in Mumbai include Piramal Aranya, Piramal Mahalaxmi, Piramal Revanta, and Piramal Vaikunth, which offer 2 to 5 bedroom luxury residences and townhomes.