Buying property in Navi Mumbai as an NRI: the framework

What may be acquired

The exchange-control framework generally permits non-resident Indians to acquire residential and commercial immovable property in India. The significant exclusions are agricultural land, plantation property and farmhouses, which are not available for acquisition under the general permission.

Property acquired by inheritance is treated separately from property acquired by purchase, and the rules that apply to it differ.

• Residential property — generally permitted.
• Commercial property — generally permitted.
• Agricultural land, plantations, farmhouses — not under the general permission.
• Inherited property — a different set of rules applies.
• The number of properties is not the constraint; the type is.

How the money must move

Payment must come through banking channels. It cannot be settled in cash, and it cannot be routed through informal arrangements — a point worth stating plainly because informal routing is occasionally suggested as a convenience and creates serious exposure.

The account the funds come from matters, because it affects what you may repatriate later. Money brought in through normal banking channels or paid from an NRE account is treated differently on the way out from money paid from an NRO account. Decide this before you pay, not when you sell.

• Funds must move through banking channels.
• Payment from NRE, NRO or FCNR accounts, or by inward remittance.
• The source account affects your repatriation position years later.
• Keep complete records of every remittance — you will need them to repatriate.

Two different definitions of 'resident'

This causes more confusion than anything else in the area. Residential status under the exchange-control framework and residential status under income tax law are determined by different tests, and a person can be classified differently under each.

Exchange control governs what you may buy and how you may pay. Income tax governs how rental income and capital gains are taxed. Do not assume one answer covers both.

Financing

Indian lenders offer home loans to NRIs. The assessment covers the same ground as for a resident borrower — income, obligations, credit history, property title — with additional considerations around income documentation from abroad and the currency of your earnings.

Loan servicing is generally required through the permitted account routes, and lenders differ in their appetite and documentation requirements. It is worth establishing your position with a lender early, because it takes longer from abroad.

The practical problem: due diligence at a distance

The legal framework is manageable. The harder problem is that the checks that protect a buyer — visiting at different times, verifying documents, inspecting at handover — are all substantially harder from abroad.

This is where NRI purchases most often go wrong, and it is not a regulatory failure. It is that someone bought on the strength of photographs and a relative's assurance.

• Instruct your own lawyer in India — not the developer's, not a family friend acting informally.
• Commission an independent title search and read the report yourself.
• Verify the RERA registration and read the filed progress updates; both are public and accessible from anywhere.
• Arrange a genuinely independent inspection at handover.
• Be cautious about relying on family to make judgments you would want to make yourself.

What to settle before committing

A short list, all of which is easier to resolve before payment than after.

• Which account will fund the purchase, and what that means for repatriation.
• Whether you will grant a power of attorney, to whom, and how narrowly drawn.
• How the property will be managed if it is let.
• Your tax position on rental income in both countries.
• Your expected exit, and the TDS position when an NRI sells.