NRI Real Estate - 7 Things to Check Before Buying
Real Estate is a hot favourite among NRIs but rushing into a deal without due diligence can be a costly mistake. Check these 7 things before investing in a property in India.
Rental Yield
The rental yield in most Indian cities is a mere 2-3%, far short of many global markets. Do not get lured by brokers or builders. Ask around for the actual rental rate - don’t blindly trust your broker.
Title
If you are buying from the secondary market, this becomes very important. Mere presence of the seller’s name in the property card or land records may not be sufficient. Long lost relatives can crop up years after purchase with claims. Hire a good lawyer to do a thorough title search.
Rules
India allows NRIs to buy residential or commercial property. They can inherit agricultural land, but not purchase it. Local state laws may also restrict purchases from out-of-state persons.
Taxes
India has tough TDS provisions for NRIs when it comes to real estate. Tenants have to deduct TDS at a 31.2% tax rate. If you sell property, the buyer has to deduct tax at the applicable tax rate on the sale value. Eg: 12.5% for long term capital gains tax. There are ways to avoid TDS by giving Form 13 to the assessing officer but typically you need to just claim it back in your income tax return.
RERA
This is important if you are buying an under construction property. Projects have to be registered with the RERA authority of the state, but there are loopholes. Builders often list a very generous completion date while registering with the RERA authority. This is much later than the date mentioned to you and written in your contract. This makes it easier for them to delay completion and handing over possession.
Property Management
Managing an Indian property from the UAE is not easy. There may be society meetings to attend, maintenance to pay, tenant agreements to renew and repairs to make. Appoint a trusted family member with a power of attorney to look after your property.
Currency
The returns from your Indian property will be INR. However what matters to you is AED. Rupee depreciation of 3-4% per year eats into rental income as much as any other rupee-denominated income. Before investing, be realistic about your AED returns.
The Bottom Line
Indian real estate can be a solid part of your investment portfolio, but it's not the guaranteed wealth-builder many assume it to be. Between low rental yields, rupee depreciation, and complex tax rules, your actual AED returns may fall short of expectations. The key is going in with eyes wide open. Do your homework, hire good advisors, and be realistic about the time and effort required to manage a property from abroad. If the numbers still make sense after accounting for all these factors, you're making an informed decision — not an emotional one.
Most Asked Questions About NRI Real Estate
1. Can NRIs buy any type of property in India?
NRIs can purchase residential and commercial properties freely. However, you cannot buy agricultural land, farmhouses, or plantation property. You can inherit agricultural land but not purchase it directly.
2. What's considered a good rental yield in India?
Most Indian cities offer 2-3% rental yields, which is significantly lower than many global markets. Don't expect yields comparable to Dubai (5-7%) or other international cities. Factor this into your return calculations.
3. How can I avoid TDS deduction on my rental income?
Tenants are required to deduct TDS at 31.2% on rent paid to NRIs. You can submit Form 13 to the assessing officer to get a lower/nil TDS certificate if your actual tax liability is lower. Alternatively, claim the excess TDS back when filing your income tax return.
4. What is a title search and why do I need one?
A title search verifies the legal ownership history of a property. It's crucial for secondary market purchases because disputes from previous owners or their heirs can surface years later. Hire a property lawyer to conduct a thorough 30-year title search.
5. How do I manage my Indian property from the UAE?
Appoint a trusted family member or professional property manager with a Power of Attorney. They can handle society meetings, maintenance payments, tenant agreements, and repairs on your behalf.
6. What is RERA and how does it protect me?
The Real Estate Regulatory Authority (RERA) requires builders to register projects and protects buyer interests. However, check the actual completion date registered with RERA—builders often list dates much later than what's in your agreement, giving them room to delay.
7. How does rupee depreciation affect my returns?
The rupee typically depreciates 3-4% annually against major currencies. If you earn 5% rental yield in INR but the rupee falls 3%, your actual AED return is only around 2%. Always calculate returns in your home currency.
8. What happens when I sell my Indian property as an NRI?
The buyer must deduct TDS on the sale value—typically 20% for short-term capital gains (property held less than 2 years) or 12.5% for long-term capital gains. You can claim excess TDS back when filing returns.
9. Should I buy under-construction or ready-to-move property?
Ready properties eliminate possession delays and RERA complications. Under-construction properties may be cheaper but carry completion risks. If buying under construction, verify RERA registration and check the actual registered completion date, not just the builder's promise.
10. Can my tenant refuse to deduct TDS on rent?
No. It's a legal requirement for tenants to deduct TDS at 31.2% when paying rent to NRIs. If they don't comply, they're liable for penalties. If you want lower TDS, you must obtain a certificate from the Income Tax Department.
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