Real estate investment for NRIs: Why you shouldn’t treat your property in India as passive asset

Indian property can be a good investment for Non-Resident Indians (NRIs). However, buying a home or plot does not end their responsibilities. Property needs regular attention even when its owner lives abroad. Treating it as something you can buy and forget may create expensive problems.

NRiSimplify co-founder Gaurav Matta said, “Indian real estate can be an excellent investment for an NRI, but it is rarely passive. The investment doesn’t end when you buy the property. Someone has to manage the tenant, rent, maintenance, taxes, documentation and compliance. When you sell, you have to deal with capital gains, TDS and repatriation.”

Unlike a mutual fund investment, property involves work. Someone must collect rent, manage tenants, arrange repairs and check property tax payments.

Housing society disputes and sudden plumbing problems also need attention. Distance and time zone differences can make these tasks harder.

A trusted local representative or paid property manager can help handle these responsibilities. Without supervision, minor maintenance problems may lead to serious damage.

Unchecked property issues can also lead to disputes over illegal occupation. Owners must therefore budget for management, rather than assuming rent will arrive without effort.

Taxes and paperwork add another layer of responsibility. NRIs must follow rules under the Foreign Exchange Management Act when buying or selling. Rent earned in India is taxable. Owners need to manage their PAN details and file local tax returns.

Selling brings further tax complications, including Tax Deducted at Source (TDS). The supplied text says buyers deduct TDS from the entire sale amount.

This can block a portion of the seller’s money. A certificate allowing lower deductions may help avoid such cash flow difficulties.

Currency movements can also reduce the value of an investment abroad. A property gaining value in rupees may deliver weaker returns in another currency.

Matta said, “A property that doubles in rupee value hasn’t necessarily doubled your wealth in your home currency. Currency movement alone can make a meaningful difference. For example, a ₹2 crore property would have been worth about U$238,000 in October 2024. At today’s exchange rate, the same ₹2 crore is worth about $208,000, a reduction of roughly 13% in dollar terms.”

“However, the property has not fallen by a single rupee in India. The same calculation shows a reduction of about 13% in pound terms and 8% in Canadian-dollar terms,” he added.

Selling properties

Sending sale proceeds overseas also requires planning. Owners must use the required banking channels, including relevant NRE or NRO accounts.

Documentation from a chartered accountant helps show that taxes have been paid. These steps make selling and transferring money more involved than many buyers expect.

Properties can take months or years to sell. Brokerage, legal expenses, taxes, repairs and vacant periods can reduce earnings. Society maintenance charges may continue even without tenants.

“For an NRI, Indian real estate should therefore be treated as an actively managed investment, with a clear entry, holding and exit strategy, rather than a buy-and-forget asset,” Matta said.