Published on and written by Cyril Jarnias
Investing in real estate in India is attracting more and more non-residents, whether they are Non-Resident Indians (NRIs), Overseas Citizens of India (OCIs), or simply foreigners drawn by the market’s potential. But once you step outside resident status, buying a property becomes a highly regulated journey, governed by a mosaic of laws, central bank circulars, and sometimes confusing tax rules.
A foreigner’s purchase is strictly governed by the FEMA law, RBI rules, and RERA regulation. It is crucial to understand the eligibility conditions, permitted property types, acceptable funding sources, procedures to follow, as well as tax implications and fund repatriation rules to avoid any disputes or financial loss.
A Highly Structured Legal Framework
India leaves practically nothing to chance when it comes to real estate owned by non-residents. The main laws form a foundation that any foreign buyer should know, at least in broad strokes, even before starting to look for an apartment in Mumbai or an office in Bangalore.
The Foreign Exchange Management Act (FEMA), in force since 1999, governs capital movements and asset acquisitions in India. It notably defines the status of a “person resident outside India,” authorized operations, and conditions for acquiring immovable property by non-residents. The Reserve Bank of India (RBI) is the authority responsible for enforcing and adapting this framework through regulations and circulars.
Alongside FEMA, several laws complete the framework. The Real Estate (Regulation and Development) Act, better known by the acronym RERA, requires the registration of real estate projects, imposes transparency obligations on developers, and provides a dispute resolution mechanism. The Transfer of Property Act of 1882 outlines general rules for property transfer, while the Registration Act (now replaced by a new 2025 text establishing online registration) requires sale deeds to be registered with the sub-registrar’s office.
The Indian government is modernizing land records via the DILRMP program, thus facilitating property title checks. Furthermore, laws like the Foreign Contribution (Regulation) Act and the consolidated policy on foreign direct investment (FDI) apply in special cases, such as long-term leases or investments by foreign companies.
The entire framework has a direct consequence on practice: a purchase by a foreigner can no longer be done “the old-fashioned way” with a few papers signed in a developer’s office. A regulated sequence must be followed: checking FEMA compliance, ensuring the project is properly registered under RERA, that the deed is correctly registered, payments go through the proper accounts, and each step leaves a regulatory trail.
Who Can Buy What: The Central Role of the Buyer’s Status
The starting point for any project is the buyer’s legal status under FEMA and the RBI. India clearly distinguishes non-resident Indians and persons of Indian origin from “standard” foreigners, granting them radically different rights.
NRIs, OCIs, PIOs: Broad Rights But Clear Limits
A Non-Resident Indian (NRI) is an Indian citizen residing abroad. Alongside them, an Overseas Citizen of India (OCI) is a person who is no longer an Indian citizen but has a link of origin with India (former citizen, parent, grandparent, great-grandparent, or spouse of an Indian or OCI). Since 2015, the PIO (Person of Indian Origin) category has been merged with the OCI scheme, simplifying matters: in practice, NRIs and OCIs (including ex-PIOs) are treated similarly for real estate.
Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) enjoy great freedom to invest in India. They can buy, without prior permission from the Reserve Bank of India (RBI), all types of residential properties (apartments, villas, row houses, buildable plots) and commercial properties (offices, shops, warehouses, industrial units). There is no ceiling limiting the number of residential or commercial properties an NRI or OCI can own.
Their main limitation is elsewhere: they cannot directly purchase agricultural land, plantations (tea, coffee, rubber, etc.), or farmhouses. These property categories can only be held if they were acquired when the person was still living in India as a resident, or if received through inheritance, subject to local land laws. A specific application to the RBI is granted only on a case-by-case basis and remains very restrictive.
Foreigners Not of Indian Origin: Very Limited Possibilities
At the opposite end of the spectrum, a foreigner of non-Indian nationality, without Indian origin, living outside India, cannot practically buy real estate in their own name in India. The general rule is simple: it is prohibited to acquire an immovable property, except by inheritance, and under conditions.
Foreigners residing in India are considered residents under FEMA if they stay for more than 182 days in the previous financial year and their presence indicates an intent to stay (employment, business). In this case, they can acquire a dwelling for their residential use, but the transaction in practice requires permissions, notably from the RBI and sometimes state authorities.
For certain countries, restrictions are even stronger. Citizens of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, and Bhutan must obtain prior permission from the RBI to acquire or transfer a property, including for leases over five years, even if they live in India. This regulatory caution stems more from geopolitical considerations than economic ones.
Foreigners who do not wish to buy can rent a dwelling in India for a maximum period of five years without RBI permission. Beyond this period, the lease falls under the capital account regulations and FEMA.
Foreign Companies, Embassies, and Special Cases
Foreign companies also cannot freely engage in land speculation. The foreign investment policy prohibits FDI in the “real estate business” understood as buying and selling land and buildings for capital gains. However, a foreign company can, via a subsidiary, branch, or liaison office in India, acquire offices or facilities for its own activities, and invest 100% in construction projects, infrastructure, or REITs registered with SEBI.
Diplomatic missions have a specific regime: they can buy and sell properties (excluding agricultural land) but must obtain approval from the Indian Ministry of External Affairs.
What Types of Properties Are Accessible to Foreigners
For an NRI or OCI, the choice of property type depends on both regulations and purely economic considerations. FEMA rules draw a clear line between three main categories: residential, commercial, and agricultural land / plantations / farmhouses.
Residential properties sought by Non-Resident Indians (NRIs) include classic market products: condominium apartments, detached villas, row houses, townhouses, and serviced plots for construction. Demand is primarily concentrated in major metros like Mumbai, Delhi NCR (notably Gurgaon and Noida), Bangalore, Hyderabad, Chennai, and Pune, as well as more emotionally connected destinations like Goa, Kochi, and certain mid-sized cities.
Commercial properties include offices, shops, warehouses, small industrial units. Here too, NRIs and OCIs can acquire them without any limit on number, for rental use or to house a business.
Finally, there are properties subject to a direct purchase ban: agricultural lands, plantations, and farmhouses. An NRI can, however, retain agricultural land acquired when they were still living in India, and inherit it if a parent residing in India bequeaths it. But they cannot buy a new field or plantation to start an activity, except by exceptional waiver.
The acquisition of a heritage-listed property by a foreigner is not prohibited, but it is subject to specific permissions from heritage authorities and involves significant constraints for renovation and property use.
Finally, a practical element strongly impacts the cost: the property’s status regarding construction. Properties under construction are subject to the Goods and Services Tax (GST), whereas “ready-to-move-in” dwellings with a completion certificate are exempt. For a foreign investor, this tax element can significantly alter the trade-off between new and completed properties.
How to Finance a Purchase: Accounts, Currency, and Loans
For a foreigner, the question isn’t just whether one has the funds, but whether these funds are eligible under FEMA and RBI rules. A real estate purchase in India must be paid for in rupees, through authorized banking channels, without recourse to cash or currencies given directly to the seller.
Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs) must open specific accounts for their real estate transactions in India. The recommended accounts are NRE (Non-Resident External), NRO (Non-Resident Ordinary), or FCNR (Foreign Currency Non-Resident). These accounts allow receiving fund transfers from abroad, paying deposits and loan installments, as well as collecting rents or future sale proceeds. It is important to note that RBI regulations prohibit any direct payment in foreign currency (like dollars) to the developer. All funds must pass through an authorized bank and be converted into Indian rupees (INR).
For foreigners not of Indian origin, access to Indian home loans is extremely limited. Banks reserve their loan offers for NRIs and OCIs. The latter can borrow from major banks and specialized institutions, often up to 75–80% of the property value, with rates starting around 7% per year, but which can rise significantly depending on profile, property type, and market conditions.
To obtain a home loan in India, institutions generally require a minimum age, professional tenure abroad, a specific income level, sometimes a degree, and very often the presence of a co-applicant or local contact. Repayment must be made in rupees, via NRE or NRO accounts, through EMI deductions. For under-construction homes, many contracts include a pre-possession period where the borrower pays only interest, until handover.
The buyer must keep in mind that ancillary costs (stamp duty, taxes, lawyer fees, possible real estate agent commission, notary fees, etc.) are not included in the loan. They can represent an additional 5 to 10% of the price and must be financed with own funds.
The Strategic Role of the Power of Attorney
An NRI or OCI is not always available to sign a sale agreement, check plans, or appear at the sub-registrar’s office for final registration. This is why the Power of Attorney (PoA) plays a central role in the practice of transactions involving non-residents.
A PoA is a mandate authorizing a third party to perform certain specific acts, such as signing the sale deed. It is not a sale deed: one cannot ‘sell’ a property solely by power of attorney; a registered sale deed remains essential to transfer ownership.
Supreme Court of India
Prudence dictates favoring a special power of attorney, limited to a specific operation and property, over a very broad general power of attorney. The document must detail the powers granted, full identities of the parties, reasons, and include a revocation clause. It is executed on stamp paper and must be registered when it concerns immovable property.
For a Non-Resident Indian, creating a power of attorney begins at the Indian consulate or embassy in the country of residence. The signature must be executed before a local notary or consular officer. For Hague Convention member countries, an apostille is often required. The document must then be sent to India for adjudication and registered with the sub-registrar. Stamp duty and registration fees, the amount of which varies depending on whether the attorney is a family member or not, apply.
Once validated, this PoA allows the agent to go sign the final deed, present all original documents, and finalize the transaction, under the supervision of a lawyer who ensures the powers are not exceeded.
The Concrete Process of a Purchase: From Eligibility to Registration
In practice, the purchase process for a foreigner follows a fairly clear sequence, but one that requires rigor and guidance. Each step serves a specific purpose: complying with foreign exchange laws, securing the title, avoiding dubious projects, and ensuring proper use of funds.
The first step is to verify eligibility. Are you an NRI, OCI, simple foreigner residing or not in India? Are you from a country subject to specific restrictions? What type of property do you want to buy? This clarification immediately tells you if the project is permitted, if RBI permission will be needed, or if the operation is simply impossible (for example, a French resident with no ties to India wanting to directly buy an apartment from abroad).
Before purchase, the foreign buyer must obtain a PAN (mandatory tax number for real estate transactions), open NRE/NRO bank accounts, and set up a power of attorney if necessary. It is also crucial to clarify their banking situation if using a loan. From this stage, it is highly recommended to surround oneself with a lawyer specializing in real estate law and, if possible, a tax advisor.
Choosing a property isn’t just about visiting apartments or browsing real estate portals. You must check if the new project is properly registered under RERA, if the developer has a solid track record and no major litigation, if the location benefits from existing infrastructure and development prospects. In the resale market, examining the seller is equally important: can a co-owner really sell alone, is the property tenanted, is there ongoing litigation?
Once a property is identified, due diligence includes examining the chain of title for 12 to 30 years, obtaining an encumbrance certificate to verify the absence of liens, checking mutation records (khata), and searching for disputes. For land or a new project, add verification of zoning, building certificates, approved plans, agricultural land conversion permissions, and environmental constraints.
This work, often seen as tedious, is actually the best insurance against unpleasant surprises. Many land disputes in India arise from an old title defect, a poorly registered mutation, or non-conforming land use.
Once the sale agreement is signed, specifying price, timeline, and conditions, the foreign buyer makes payments via their NRE/NRO accounts or by progressively drawing down a loan. For an under-construction property, payments typically follow the progress of work.
The final stage of this journey is the execution and registration of the sale deed. The deed is signed either by the buyer in person or by their attorney holding a valid PoA, then presented to the competent sub-registrar’s office. Payment of stamp duty and registration fees is mandatory for the transaction to be enforceable against all. The new 2025 framework now allows most of this procedure to be done online, notably e-stamping and e-signature, with a legal deadline of seven days to finalize registration.
At this point, ownership is registered in the buyer’s name, and the title becomes public. However, a few post-registration formalities remain: applying for mutation in local tax records, updating society/condominium accounts, transferring service contracts (water, electricity), and ensuring all seller commitments (remaining work, handover of documents) have been fulfilled.
The Real Cost of a Purchase for a Foreigner: Beyond the Sticker Price
A foreign investor who merely compares prices per square foot between Mumbai and London is making a miscalculation. In India, as elsewhere, the acquisition cost is not limited to the price agreed with the seller. Stamp duty, registration fees, taxes, professional fees, and other ancillary costs can sometimes add 8 to 10% to the transaction amount.
Stamp duty, levied by the states, generally represents between 3 and 10% of the property’s value, depending on the state, property type, buyer’s gender, situation (e.g., senior), and even the zone (urban, rural). Cities like Delhi, Mumbai, Bangalore, or Chennai have rates around 4 to 7%, while some states offer discounts for female buyers.
Registration fees often hover around 1% of the price, sometimes with an absolute value cap. Added to these two items are lawyer fees (often around 1.5%), notary fees, possibly a real estate agent commission (1–2%, in principle the seller’s responsibility but negotiable), and mutation and society transfer fees.
The annual property tax rate, expressed as a percentage of the property’s reference value, that the owner must pay to the municipality.
Taxation on resale also has a significant impact on the real return. A sale within 24 months of purchase is considered generating a short-term capital gain, taxed at the income tax slab rates, which, for an NRI, can mean an effective tax rate of 30% or more. Beyond 24 months, the gain is qualified as long-term, and taxed at 20% with indexation, meaning the acquisition cost is adjusted for inflation, reducing the taxable gain.
The buyer of a property sold by a Non-Resident Indian (NRI) must deduct tax at source (TDS) on the price paid. The rate is 20% for a long-term capital gain and 30% for a short-term gain, applied only on the capital gains. Surcharges and cess apply above certain income thresholds. If the amount withheld exceeds the tax ultimately owed by the NRI seller, they can either apply for a certificate for a lower withholding in advance or claim a refund by filing their annual income tax return.
Finally, for an NRI or OCI, the real question is often: can I repatriate my money upon sale? FEMA and the RBI allow repatriation of the initially invested amount, provided proof that the acquisition complied with the rules (payments via NRE/NRO or FCNR, FEMA compliance). Capital gains can also be repatriated after paying Indian taxes, within the general limit of 1 million US dollars per year from NRO accounts, and with a specific restriction: repatriation of sale proceeds from properties bought with NRE/FCNR funds is possible for a maximum of two properties per lifetime; beyond that, RBI approval is required.
When the foreign buyer resides in a country that has a Double Taxation Avoidance Agreement (DTAA) with India, they can generally claim a credit for the tax paid in India against their own national tax liability, which limits double taxation but doesn’t always eliminate it entirely.
Inheritance, Subsequent Sales, and Litigation Risks
One of the frequent pitfalls for foreigners concerns inheritance and subsequent transfers. An NRI, OCI, or even a foreigner not of Indian origin can inherit property in India from a person who lived there, be it an apartment, office, or even agricultural land. But this right comes with conditions: the original property itself must have been acquired in compliance with foreign exchange rules, and the subsequent sale of the property to another foreigner often requires explicit RBI permission.
The taxation on the sale of an inherited property (short/long-term distinction, TDS) remains unchanged but requires specific formalities: obtaining a succession certificate, verifying the will, distribution among heirs, and registration of mutations. For a foreigner not of Indian origin, repatriation of sale proceeds requires formal approval from the central bank.
Beyond estate aspects, the risks for a foreign investor concentrate on three grounds: imperfect property titles, projects non-compliant with administrative permissions, and non-compliance with foreign exchange rules. An incomplete EC (encumbrance certificate), a mutation never executed in the seller’s name, agricultural land converted without real permission, or a payment made outside banking channels can turn an investment into a source of prolonged dispute.
The best protection during a real estate purchase is to treat every transaction as a complete due diligence operation. This involves systematically verifying: the chain of property titles, occupancy and commencement certificates, property compliance with the master plan, society bylaws, any ongoing lawsuits involving the developer or seller, and the correct application of FEMA (Foreign Exchange Management Act) rules for each fund transfer.
Why Professional Guidance is Essential
The complexity of the Indian framework is not there to deter foreign investment, but to regulate it. The flip side of this sophistication is that an isolated individual, especially a non-resident, will struggle to secure each link in the chain. This is why specialized sources emphasize the importance of forming a local “team”: a lawyer specializing in real estate, an accountant or chartered accountant familiar with FEMA rules and NRI taxes, an independently remunerated real estate advisor.
Guidance is essential at all stages: during rental setup (for contracts, security deposit, registration, and TDS on rents sent abroad) and during resale (to optimize the tax burden and organize smooth fund repatriation via authorized banks).
In a market where NRIs represent a significant share of investment and where the diaspora holds estimated wealth of over a trillion dollars, India has an interest in making these processes readable and predictable. The digitization of land records, the establishment of RERA, online deed registration, and the progressive clarification of repatriation rules are steps in this direction. But for a foreigner, the process of buying real estate in India will remain an exercise in legal and financial precision, to be approached with method and no improvisation.
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Cyril Jarnias is an independent expert in international wealth management with over 20 years of experience. As an expatriate himself, he is dedicated to helping individuals and business leaders build, protect, and pass on their wealth with complete peace of mind.
On his website, cyriljarnias.com, he shares his expertise on international real estate, offshore company formation, and expatriation.
Thanks to his expertise, he offers sound advice to optimize his clients' wealth management. Cyril Jarnias is also recognized for his appearances in many prestigious media outlets such as BFM Business, les Français de l’étranger, Le Figaro, Les Echos, and Mieux vivre votre argent, where he shares his knowledge and know-how in wealth management.
