Can an NRI with His Indian Resident Brother Jointly Purchase Property in India?

Yes, a Non-Resident Indian (NRI) can jointly purchase property in India with an Indian resident brother. This article outlines the steps and considerations involved in this process, ensuring you adhere to relevant laws and regulations.

Property Type

NRIs can buy both residential and commercial properties in India. However, purchase of agricultural land, plantation property, or farmhouses is restricted unless it is inherited.

Joint Ownership Structure

The ownership can be structured as a joint purchase where both the NRI and the Indian resident brother share ownership. The property documents should clearly specify the ownership shares, detailing each party's percentage of investment and possession rights.

Financing

If the NRI plans to finance the purchase through a loan, it's crucial to check with Indian banks regarding eligibility criteria, as some banks have specific policies for NRIs.

Tax Implications

Both parties should be aware of the tax implications related to property ownership, including income tax on rental income and capital gains tax upon sale.

Regulatory Compliance

Ensure compliance with applicable laws and regulations, such as the Foreign Exchange Management Act (FEMA) guidelines, and seek professional advice to navigate the process.

Five Simplified Steps for NRI to Purchase Immovable Property Jointly with Indian Resident Brother

Here are the simplified steps an NRI can follow to purchase immovable property in India with their Indian resident brother:

1. Power of Attorney (POA)

If the NRI is not physically present in India, they can give a Power of Attorney (POA) to their brother to complete the property purchase:

Prepare the POA draft in word document. Print the POA draft on A4 size paper. NRI and two witnesses sign the POA. Get the POA attested by the Indian embassy in your country. Send the POA to your brother in India via a reputable shipping partner like DHL or FedEx. Brother should adjudicate the POA in the District Registrars' office in the jurisdiction of the property location.

2. Sale Agreement

Sale agreement is a promissory document that states the schedule of property transfer to the buyer at a future date:

Draft the sale agreement in word document. Ask the brother to buy a non-judicial e-stamp paper with a stamp duty value of 0.1 of the buying price. Brother should print the sale agreement draft on the non-judicial e-stamp paper followed by A4 size bond paper. Seller, buyer, and two witnesses sign the sale agreement. If NRI gives POA to brother, the brother signs the sale agreement on behalf.

3. Home Loan

A range of banks and finance companies provide joint loan accounts for NRIs and residential Indians to buy immovable property in India:

The bank requires income proof of buyers. Property marketability, seller's sale deed, and encumbrance certificate. Sale agreement. The bank issues the loan in Indian currency, and it has to be repaid in the same currency through your NRI, NRO/NRE, or a residential Indian bank account. The bank does not credit the loan amount directly to the NRI's bank. Instead, it is credited directly to the seller's or developer's bank account. NRI can coordinate with the bank remotely via email, telephone, or WhatsApp without physical presence at the bank, but the NRI or POA holder needs to be present for MODT (Martin Omrani Damyak Tarafirat) registration at the sub-registrar office. In a joint loan account, if the NRI is the primary applicant, and the residential Indian is the secondary applicant, all the joint borrowers should present for MODT registration, or the POA holder can present on their behalf.

4. TDS (Tax Deducted at Source)

Tax Deducted at Source (TDS) applies:

The buyer is required to deduct TDS from the consideration if the property value is more than Rs. 50 lakh and deposit it in the income tax department. For Indian citizens, the TDS on the seller is 1% of the consideration or the guidance value, whichever is higher. The rates for NRI sellers range from 20.80 to 23.92 based on the consideration, capital gains, and the duration between the purchase and sale of the property. However, NRI sellers can apply for a low tax certificate from the income tax department to reduce the TDS rate. You can log into the Income Tax department website and pay the TDS.

5. Sale Deed

A sale deed is the written document that transfers the ownership of the property:

Draft the sale deed in word document. Specify the share in property ratio of NRI and the Indian resident share in the property. Print the sale deed draft on document paper. Pay the stamp duty and registration fee. Book the registration appointment. Seller, buyer, POA holder, and two witnesses visit the sub-registrar office for the sale deed registration.

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