NRI Guide: 6 Essential Factors to Consider Before Investing in Indian Real Estate
Non-Resident Indians (NRIs) must carefully evaluate key factors such as purpose, costs, property management, and tax implications before investing in real estate back home. Stamp duty can range from 4–10% of the property's market value, and other expenses like registration fees and brokerage must also be factored in.
NriReal EstateProperty InvestmentIndiaTax ComplianceReal Estate NewsAug 26, 2025
Another practical consideration is succession. The next generation, often settled abroad, may have little or no interest in maintaining or managing a property in India, which can lead to future complications, say experts.
Here are six key factors NRIs should carefully evaluate before finalising a property purchase in India.
Purpose: Family Use or Investment
First, be very clear why you want to buy the property. While buying for immediate family use, such as for parents or siblings, offers direct utility, it isn't the only valid reason for an NRI to consider real estate in India. “Many NRIs today are viewing Indian real estate as a long-term diversification strategy - whether it's for future relocation, retirement planning, or creating an asset base in their country of origin,” says Sanjay Daga, CEO and Managing Director of Anex Advisory.
The key is to align the purchase with clear intent; be it self-use, rental income, or asset appreciation, rather than restricting it solely to family occupancy. Also, keep in mind that the next generation, who may be settled abroad, has little to no interest in maintaining or managing a property in India, it can lead to complications. “Succession planning becomes paramount, and without a clear interest from heirs, the property could become a liability rather than an asset for them. In such cases, it may be more prudent to consider more liquid investments,” says Anupam Rastogi, co-founder and Chief Business Officer, Square Yards.
Cost and Returns
Real estate offers capital appreciation and is a necessary element of portfolio diversification. However, depending on what one is buying, there are also these transaction costs to contend with. Stamp duty can range from 4–10% of the property's market value, and registration fees and perhaps also brokerage must be factored in as one-time expenses.
There are also ongoing maintenance fees and property taxes to consider. “It is true that rental yields can be low at 2–4% annually in many cases. If the buyer has not investigated what kind of property commands good demand in that particular area, the rental income may not be enough to offset these expenses,” says Akash Pharande, Managing Director, Pharande Spaces, a real estate developer with a focus on NRI buyers. However, the 2-4% yield is not a given. Good properties of sufficient size and in the right projects can earn much higher returns.
Management and Administration
Without someone to actively administer the property’s maintenance and tenancy matters, assuming it is rented out, the entire proposition loses a lot of viability. “Unlike many other asset classes, residential real estate requires active involvement. For such an NRI, fractional ownership would probably make more sense,” says Santhosh Kumar, vice chairman, ANAROCK Group.
Maintenance costs, especially for properties that are not self-occupied, can also eat into returns. Rental yields as we have seen are low in India and may not cover your EMI and other fixed costs. “When compared to more liquid investments like stocks or mutual funds, real estate can appear less attractive from a pure ROI perspective,” says Daga.
Property Size and Type
With all other things being equal most of the time, size and lifestyle quotient will always matter when it comes to buying a home. “NRIs have invariably seen how people live abroad, and seek to replicate such a life back home. Given the inherent civic limitations in most Indian cities, they naturally turn their sights on integrated townships where such lifestyle is assured,” says Pharande.
Integrated township properties offer convenience and security, but higher costs mean NRIs may need to plan, save, and invest for future purchase.
Big or Small?
This is a strategic financial decision that hinges on your retirement goals. Investing in a large house early on can tie up significant capital that could otherwise be diversified into other asset classes like equities or mutual funds for potentially higher returns. So, buying a smaller 2BHK property may make sense for now.
“Downsizing in retirement offers several advantages, including lower maintenance costs, reduced property taxes, and increased liquidity. Renting for a year or two upon returning to India can also be a sensible approach, allowing you to reacquaint yourself with localities that have likely changed significantly over the years,” says Rastogi.
A staged plan often works: rent where you want to live now, build a corpus, then buy the smaller end-use home closer to retirement when location needs are clearer.
Tax Matters
For transfers of property by an NRI, the buyer must deduct TDS under Section 195 on payments to a non-resident, and banks require Form 15CA and, where applicable, Form 15CB for outward remittance of the proceeds.
For transfers on or after 23 July 2024, long-term capital gains (LTCG) on immovable property are taxed at 12.5% without indexation, while rollover options under Sections 54, 54F, and 54EC remain available.
Repatriation of proceeds is allowed up to $1 million per financial year from NRO accounts, and if the property was originally purchased with foreign exchange, sale proceeds from up to two residential properties can be repatriated, subject to tax compliance. “To avoid over-deduction, sellers can apply for a lower/nil TDS certificate under Section 197 (Form 13) before completion. Banks still need 15CA/CB for the wire,” says Daga.
Frequently Asked Questions
What should NRIs consider first before buying a property in India?
NRIs should first clearly define the purpose of the property purchase, whether it is for self-use, rental income, or long-term asset appreciation. This helps in making a more informed and strategic decision.
What are the transaction costs involved in buying a property in India?
Transaction costs include stamp duty (4–10% of the property's market value), registration fees, and possibly brokerage. There are also ongoing maintenance fees and property taxes to consider.
How important is property management for NRIs?
Property management is crucial for NRIs as it involves active involvement in maintenance and tenancy matters. Without proper management, the property can lose its viability and become a liability.
What are the tax implications for NRIs selling property in India?
For property transfers by NRIs, the buyer must deduct TDS under Section 195, and banks require Forms 15CA and 15CB for outward remittance. Long-term capital gains are taxed at 12.5% without indexation, and repatriation of proceeds is allowed up to $1 million per financial year.
What is the advantage of buying a smaller property for NRIs?
Buying a smaller property can be more financially prudent as it ties up less capital, allows for diversification into other asset classes, and offers lower maintenance costs and property taxes. It can also provide increased liquidity.
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