Expert Warning: Things NRIs Must Look Out For Before Investing

By Selvan Durairaj | Finance & Legal | The WFY Magazine, November 2025 Edition

Before buying property in India, every Non-Resident Indian must understand the fine print, from taxes to succession laws. Sentiment drives many NRIs to invest in Indian real estate, but only those who plan smartly avoid costly surprises.

Coming Home Through Real Estate: The Diaspora’s Emotional Investment

For millions of Indians scattered across the world, from the skyscrapers of Dubai to the suburbs of Toronto, owning a piece of land in India is not merely a financial goal; it is an emotional anchor. Property back home symbolises continuity, belonging, and sometimes, the dream of returning one day.

Over the past decade, India’s real estate sector has quietly become a magnet for Non-Resident Indians (NRIs). According to industry data, NRI investments in Indian property are expected to cross USD 16 billion by 2025, up from USD 13.1 billion in 2023. The reasons are manifold, rising property prices abroad, the rupee’s relative stability, and India’s improving infrastructure and digital transparency in land records.

Yet, the process is far from simple. Buying real estate from abroad involves navigating regulations, taxes, legal restrictions, and practical considerations that are often overlooked. A dream home can easily turn into a legal headache if one isn’t careful.

This comprehensive guide breaks down what NRIs must keep in mind before investing in property in India, not just to buy wisely, but to ensure that the investment remains viable, lawful, and future-ready.

1. Defining the Purpose: Heart or Head?

The first question any NRI investor must ask is deceptively simple: Why am I buying this property?

For some, it is to provide a home for ageing parents or visiting family. For others, it is a retirement plan, a sentimental connection to their roots, or a means of diversifying assets. But every purpose demands a different financial and legal approach.

If it is a family-use property, the focus should be on convenience, locality, and accessibility, close to relatives, healthcare, or familiar surroundings. However, if it is an investment, the considerations shift to capital appreciation, rental yield, and liquidity.

As of 2025, the average rental yield in India ranges from 2.5% to 4.5%, significantly lower than equities or mutual funds. But in premium city zones like Bengaluru’s Whitefield or Pune’s Hinjawadi, well-managed units can fetch up to 6% yields. Therefore, clarity of intent determines not just what to buy, but where and how much to spend.

2. Legal Eligibility and Restrictions Under FEMA

The Foreign Exchange Management Act (FEMA) lays down who among the diaspora can buy property in India and what kind.

• Who can buy:
  NRIs (holding Indian passports but residing abroad) and OCIs (Overseas Citizens of India) are permitted to purchase residential and commercial properties in India without prior approval.
• What cannot be bought:
  They cannot buy agricultural land, plantation property, or farmhouses. These can only be inherited or received as gifts under specific conditions.
• Funding the purchase:
  Payments must come through banking channels via inward remittance or from NRE/NRO/FCNR accounts. Cash transactions are prohibited.
• Number of properties:
  There is no restriction on the number of residential or commercial properties an NRI can own in India.

Understanding these nuances ensures that the transaction remains compliant and prevents later disputes during resale or repatriation.

3. The Financial Planning: Counting the Real Cost

Real estate is never a one-time expense, it’s a long-term financial commitment. For NRIs, the costs extend beyond the sticker price.

Upfront Costs

• Stamp Duty and Registration Fees: Vary by state, generally between 4% and 10% of market value.
• Brokerage: Typically 1–2% of transaction value.
• Legal Due Diligence: Engaging a property lawyer can cost ₹50,000 to ₹1 lakh but is essential for title verification.

Recurring Costs

• Maintenance Fees: ₹2 to ₹8 per sq. ft. monthly, depending on the building type.
• Property Tax: Calculated annually, varies by Municipal Corporation.
• Insurance: Property insurance, often ignored, can protect against structural or tenant-related damages.

When compared to global cities like London or New York, Indian property may appear affordable, but net returns can be modest if costs are ignored.

For a ₹1 crore apartment, factoring in a 7% annual maintenance and taxation cost alongside a 3% rental yield, the effective return might hover around 2.5% post-expense.

Thus, while real estate adds stability to an NRI portfolio, it should complement, not dominate, investment planning.

4. Financing Options and Home Loans

NRIs can easily avail of home loans from Indian banks, but there are specific norms to keep in mind.

• Eligibility: Employment proof abroad, passport, valid visa, and overseas address are mandatory.
• Loan Tenure: Typically capped at 20 years.
• Interest Rates: Usually 0.25%–0.5% higher than resident Indian rates.
• Repayment: Must be made in Indian rupees through NRE/NRO accounts.

As of late 2025, the average NRI home loan rate stands between 8.75% and 9.25%, depending on tenure and credit score.

Importantly, banks prefer joint ownership with a resident co-applicant, often a spouse or parent, to simplify local documentation and repayment processes.

5. Documentation and Legal Due Diligence

The golden rule for any overseas investor: Never buy property on emotion alone.

NRIs must insist on verified legal documentation. Key documents include:

• Title deed and chain of ownership
• Encumbrance certificate (ensuring no legal dues)
• Approved building plan and occupancy certificate
• No-objection certificates from municipal authorities
• Property tax receipts

A Power of Attorney (PoA), duly attested by the Indian Embassy, can authorise a local representative to complete formalities. This is especially useful for resale or tenant management.

In 2024, India’s National Generic Document Registration System (NGDRS) expanded to 24 states, allowing digital verification of property titles. This has significantly reduced frauds, but buyers must still cross-check records through independent verification.

6. Managing Property From Afar

Owning property from thousands of miles away poses obvious challenges. Regular maintenance, tenant management, and local taxes can become logistical nightmares without ground support.

Many NRIs now rely on professional property management firms that handle rent collection, repairs, and inspections for a fee of 8–10% of monthly rent.

Alternatively, emerging models like fractional ownership platforms allow NRIs to invest in high-value commercial properties jointly, earning passive rental income without management hassles.

Another trend gaining traction is Real Estate Investment Trusts (REITs), regulated by SEBI, these allow small-ticket investments (as low as ₹10,000) in income-generating commercial assets.

These innovations reflect a maturing market, where traditional ownership is being replaced by more flexible, technology-backed participation.

7. Taxation: Understanding the Numbers

Taxation remains one of the most critical, and misunderstood, aspects of NRI property investment.

When Buying

• No additional tax liability arises during purchase, but stamp duty and registration costs apply.
• If property is purchased jointly, both co-owners must declare proportionate ownership.

When Renting Out

• Rental income earned in India is taxable at slab rates.
• TDS at 30% must be deducted by the tenant before remitting rent to the NRI’s NRO account.
• NRIs can claim standard deductions of 30% for maintenance under Section 24.

When Selling

From 23 July 2024, the long-term capital gains (LTCG) tax rate was revised to 12.5% flat (without indexation).

However, benefits under Sections 54, 54F, and 54EC (for reinvestment in property or bonds) still apply.

To repatriate funds abroad, Form 15CA (self-declaration) and 15CB (Chartered Accountant certificate) are required. The annual limit is USD 1 million per financial year.

For lower TDS, sellers can apply for a Nil/Reduced TDS certificate under Section 197 before closing the sale.

8. Repatriation and FEMA Compliance

Repatriating funds legally and efficiently is vital for NRIs who intend to sell or transfer property.

Key guidelines under FEMA include:

• Sale proceeds must be credited to an NRO account before outward transfer.
• Only two residential properties purchased through foreign remittance can be repatriated.
• Capital gains are subject to Indian taxation before repatriation approval.

Banks and authorised dealers typically complete remittance within 30 days, provided all tax documents are in order.

Failure to comply can invite penalties under FEMA, making it crucial to maintain transaction transparency.

9. Succession Planning and Inheritance Issues

Perhaps the most overlooked aspect is what happens to the property after the NRI passes away.

If the next generation has settled permanently abroad, they may have little interest in managing a property in India. Without proper succession planning, disputes, delays, and legal complications can arise.

Creating a registered will in India simplifies inheritance. Under Indian law, inheritance of immovable property by legal heirs (including foreign citizens of Indian origin) is permitted, but transfer formalities differ across states.

For OCI holders, inheritance is allowed, but sale or repatriation requires FEMA compliance and tax clearance.

Experts recommend periodic review of property documents and nomination details, especially if family structures or residency status change.

10. Evaluating Risk and Return

India’s property market has historically delivered 6–10% annual appreciation in urban centres. However, these figures vary widely by city and segment.

• Tier-1 cities (Mumbai, Bengaluru, and Delhi) have seen moderate appreciation but high liquidity.
• Tier-2 cities (Pune, Coimbatore, and Kochi) show strong growth potential, often with better rental yields.
• Holiday and retirement destinations (Goa, Dehradun, Mysuru) attract NRIs seeking hybrid-use homes.

While the emotional reward of owning property in India is immense, NRIs must treat it as a business decision, evaluating long-term rental demand, local regulations, and potential resale challenges.

Unlike financial assets, real estate is illiquid and often requires 6–12 months for sale completion. Investors should therefore diversify instead of locking large sums solely in property.

11. The Future of NRI Real Estate Investment

2025 marks a pivotal point in India’s real estate evolution. The combination of digital land records, RERA enforcement, GST rationalisation, and government housing missions has made property transactions more transparent than ever.

In states like Maharashtra and Karnataka, blockchain-based land record pilots are already underway, aimed at eliminating duplicate ownership and fraud.

At the same time, urbanisation and infrastructure growth, from new metro corridors to smart city zones, continue to push up demand for housing.

For NRIs, this means two things:

1. A safer, better-regulated market to invest in.
2. A chance to participate in India’s growth without physically relocating.

With over 32 million Indians living abroad, even a small shift in NRI real estate participation could reshape domestic property dynamics.

12. The Practical Checklist

Before finalising a purchase, every NRI should tick these essential boxes:

Step	Area of Focus	Key Actions
1	Purpose	Define intent: self-use, investment, or retirement.
2	Eligibility	Verify FEMA rules; avoid restricted property types.
3	Funding	Route payments via NRE/NRO/FCNR accounts only.
4	Due Diligence	Hire a property lawyer; verify all ownership documents.
5	Tax Compliance	Understand TDS, LTCG, and repatriation limits.
6	Management	Engage reliable local agents or management firms.
7	Succession	Draft a registered will and nominate heirs.

13. A Balanced Conclusion

Owning a home in India remains a cherished aspiration for many abroad, an emotional link to their beginnings and a symbol of continuity. Yet, in financial terms, it must be viewed through the lens of regulation, taxation, and long-term viability.

The NRI who plans carefully, stays compliant, and chooses wisely can indeed enjoy the best of both worlds, emotional fulfilment and stable financial growth.

The real goal is not just to buy property, but to own peace of mind.

Disclaimer: This article is an original editorial feature written for The WFY Magazine (November 2025 Edition) based on verified factual information available from official and public sources as of October 2025. It is intended for general informational purposes and does not constitute legal, financial, or tax advice. Readers are advised to consult qualified professionals before making investment or legal decisions.