NRI selling property in India

NRIs play a vital role in Indian real estate market. Today, Indian real estate market is one of the growing industries and the demand for properties even increasing due to factors like development in infrastructure, connectivity, good return on investment etc. compared to western countries.

NRI can sell or gift their residential or commercial property to a resident of India, PIO or another NRI. The formalities or procedure for selling your property in India depends on your residential status.

Residential status in India

The residential status in India is determined by the condition of Income tax Act based on the physical stay in the relevant financial year (tax year) or preceding ten tax years. Based on this residential status is broadly classified as “Resident” and “Non-Resident”. The “resident” is further classified as “Resident ordinary resident (ROR)” and ”Resident not an ordinary resident (RNOR)” while “Non-Resident” is classified as NRI, PIO and Foreign Origin or non-Indian origin (Refer Fig 1). Foreign citizens of non-Indian origin cannot buy a property in India. Therefore, you cannot sell your property to a non-Indian origin.

What property an NRI cannot Sell?

NRI can sell any commercial or residential property and he is also eligible to sell inheritance property but there are some conditions for selling agricultural land, plantation property and farmhouse. An agricultural land, plantation property and farmhouse cannot be sold to NRI or PIO. The NRI or PIO can acquire such property by inheritance only. Gifting of such properties can be done only to a resident in India.

There are no restrictions on the number of properties that can be purchased but there is a 10 year lock in period for property purchased in Indian currency. If sold earlier than this period NRI has to hold the entire amount in NRO account and the repatriated should not exceed USD 1 million per year. There is no lock in period for getting the repatriation benefit, if the property bought using foreign currency. But will be able to remit the amount equivalent to the purchase price only for only two properties or the up to the amount originally brought into India in foreign exchange.

Step by step guide for Selling property in India

• Do your homework: Before you go ahead to sell your property, do your homework. You need to know the current rate in your locality or neighborhood for resale property. Check for the positive and advantages for your property like connectivity, entertainment in neighborhood, reputed services like hospitals, schools and college. You can appoint a real estate agent who can do the research for you. You give also give power of attorney if you will not be present in India.
• Paperwork: Selling and buying a property involves paperwork. File all documents for selling your property, ensure you cleared all debts on the property before proceed to sell. Check with real estate brokers or dealers regarding important documents required for selling your property in India. Hire a real estate lawyer who can help you handle the paperwork.
• Important Documents: In case of property allotted by housing society, Letter of allotment allotted to you is important. The original conveyance or sale deed from the previous owner, Copy of occupation certificate, Permission to transfer the property is important for properties like apartment, villa, and row houses. NOC from housing society or association is important for transferring the property. Encumbrance certificate of property ensures the property has a clear and marketable title. Sale agreement or agreement to sell is a base document on which the sale deed is drafted.
• Real estate agent: If you are planning to sell your property to a third-party, you can seek assistance from your real estate agent. Real estate agent charge brokerage for the real estate deal but it is not always true that you can deal your property smoothly without a middleman. The reputed real estate agents can help you in your process of selling the property with their expertise in the industry.
• Marketing your property: The word of mouth can spread your property selling intention only to your friends & relatives. You need to find other source like listing your property for sale in online real estate portals, posting ad in newspaper or local dailies, Tell neighbors, post in your social networks etc. Put a “FOR SALE” sign in your property if required.
• Charted Accountant: As there is the issue of taxation for NRI property buying and selling, a charted accountant can help you clear tax deducted at source and file income-tax returns. Asset that has been held for three or more years by the NRI can attract capital gains tax. You will benefit by consulting a tax professional or charted accountant for your investments and property sale.
• Close the Deal: Once the potential buyer and you agree with the price and terms and conditions for the sale of property, you can close the deal. If you cannot present in India for completing sale process, you can give a power of attorney in favor of resident of India who can act on behalf and transfer the sales amount to your NRO account.