FEMA Rules for NRI Investing in Property in India and Repatriating Funds Abroad

India is one of the most preferred real-estate destinations for NRIs. But property investment and fund transfer by NRIs are governed strictly by FEMA (Foreign Exchange Management Act, 1999) and RBI regulations.
Understanding FEMA rules helps NRIs avoid violations, penalties, and delays in fund repatriation.

This blog explains all important FEMA rules in simple terms.

🔹 1. What Property Can NRIs Buy in India? (Allowed Under FEMA)

Under FEMA rules, NRIs can freely purchase:

✔ Residential Property

– Flats, houses, plots
– Under-construction or ready
– Any number of properties (no limit)

✔ Commercial Property

– Shops, offices, godowns, showrooms
– Industrial and commercial buildings
– Commercial plots

NRIs do not need RBI permission for these purchases.

🔹 2. What Property NRIs Cannot Buy? (Prohibited Under FEMA)

❌ Agricultural land

❌ Plantation land
❌ Farmhouses

NRIs cannot purchase these in their personal name.

✔ NRIs CAN own them if:

• Inherited

• Received as gift (from FEMA-defined relatives)

• Part of ancestral property

Otherwise, purchase is prohibited.

🔹 3. How Can NRIs Pay for Property in India? (Allowed Payment Methods)

FEMA mandates that payment must be through:

✔ NRE Account

✔ NRO Account

✔ FCNR Account

Payment allowed through:

• Bank transfer

• Debit to NRE/NRO

• Traveller’s cheque / demand draft from NRE/NRO account

• Remittance from abroad

Cash purchase is not allowed.

🔹 4. Can NRIs Take Home Loans in India? — YES

NRIs can take home loans from:

• Indian banks

• Housing finance companies

• NBFCs (RBI-approved)

Loan repayment can be made through:

✔ NRE
✔ NRO
✔ FCNR
✔ Inward remittances
✔ Close family members (if permitted by lender)

🔹 5. FEMA Rules for Selling Property in India (NRI)

✔ NRIs can sell:

• Residential property

• Commercial property

• Agricultural land only if inherited or gifted

✔ NRIs can sell property to:

• Resident Indians

• NRIs (subject to certain rules)

• OCI cardholders

Sale proceeds must be deposited in NRO Account, not NRE.

🔹 6. FEMA Rules for Repatriation (Sending Money Abroad After Sale)

This is the most important part.

⭐ A. Repatriation Limit for NRIs

NRIs can repatriate:

✔ Up to USD 1 million per financial year

(approx. ₹8–9 crores depending on exchange rate)

This includes:

• Sale proceeds

• Inheritance

• Gifts

• Any other eligible assets

⭐ B. Documents Required for Repatriation

Banks require:

• Sale deed

• Proof of inheritance/gift (if applicable)

• Form 15CA (Income Tax Department)

• Form 15CB (Chartered Accountant certificate)

• PAN card

• NRO account details

Banks will not allow remittance without tax compliance.

⭐ C. Repatriation Conditions for Property Purchased Using NRE Funds

If the property was purchased:

• With NRE funds, and

• The sale proceeds are deposited in NRO account,

Then FEMA permits repatriation of:

✔ Sale proceeds of maximum two residential properties

Capital gain tax must be paid before repatriation.

⭐ D. Repatriation of Inherited Property

If the property was inherited:

✔ Up to USD 1 million per financial year can be repatriated
✔ CA certificate required
✔ Legal heir documents must be submitted

🔹 7. FEMA Rules for NRIs Transferring Money Into India

NRIs can send unlimited funds to India through:

✔ Bank remittance
✔ NRE accounts (fully repatriable)
✔ NRO accounts (restricted repatriation)
✔ FCNR deposits

FEMA only controls the outward flow, not inward flow.

🔹 8. FEMA Restrictions NRIs Must Avoid

❌ Buying agricultural land directly

❌ Investing cash into property

❌ Depositing sale proceeds into NRE account

❌ Repatriating without paying capital gains tax

❌ Receiving money in personal foreign accounts directly from buyer (illegal)

❌ Benami transactions (buying land in someone else’s name)

Violations can result in penalties under FEMA and the Benami Prohibition Act.

🔹 9. FEMA Compliance Tips for Safe NRI Property Investment

✔ Always route transactions through bank

✔ Keep all payment receipts

✔ Maintain clear ownership documents

✔ When selling, ensure buyer deducts correct TDS

✔ Hire a Chartered Accountant for Form 15CA/15CB

✔ Use NRO account for all sale proceeds

✔ Avoid agricultural land unless inherited

⭐ Conclusion

FEMA rules make it easy for NRIs to invest in residential and commercial real estate in India, but also impose strict conditions on:

✔ What type of land they can buy
✔ How they can pay
✔ How much money they can repatriate
✔ Tax and documentation requirements

Understanding FEMA rules ensures:

• Safe investment

• Smooth sale

• Legally compliant repatriation

• Protection from penalties