An NRI or an OCI cardholder can buy a flat, a house, a shop, an office or an urban plot in India without any approval from the Reserve Bank. FEMA puts only two real conditions on the purchase. The property must not be agricultural land, a plantation or a farm house, and the price must be paid through Indian banking channels from money that came from abroad or sits in an NRE, FCNR(B) or NRO account. There is no cap on the number of homes or offices an NRI can buy.
Where buyers get caught is the second condition, and the effect it has years later. The way you fund the purchase today decides how much of the sale money you can send abroad when you sell. This piece walks through who can buy what, which payment routes are allowed, how a home loan fits in, and how to set up the paper trail so a future sale is not a problem. The rules are taken from the Reserve Bank's Master Direction on acquisition or transfer of immovable property under FEMA (updated as on 1 September 2022), checked as on 15 November 2026.
First check that you are an NRI or OCI under FEMA
Para 2 of the Master Direction defines an NRI as a person resident outside India who is a citizen of India. An OCI is a person resident outside India who is registered as an Overseas Citizen of India cardholder. Both words carry the FEMA test of residence, which runs on a different basis from the 182-day count in income tax. Someone who has just moved abroad for a job may already be non-resident under FEMA while still being resident for tax, or the other way round. If your status is borderline, settle it first using the FEMA and income tax residential status comparison, because the rules below apply only to a person resident outside India.
A resident Indian buying property in India is outside these rules altogether. A foreign citizen who holds neither Indian citizenship nor an OCI card falls under a separate and much narrower set of permissions.
What each kind of non-resident buyer can acquire
The Master Direction treats buyers differently depending on citizenship and the source of the property. The table pulls the main cases together.
| Buyer | Purchase | Gift | Inheritance |
|---|---|---|---|
| NRI or OCI | Any immovable property other than agricultural land, plantation property or farm house (para 3.1.1) | From a resident, or from an NRI or OCI who is a relative (para 3.1.2) | From a resident, or from a non-resident who acquired it lawfully (paras 3.1.3 and 3.1.4) |
| Foreign national spouse of an NRI or OCI | One property, jointly with the NRI or OCI spouse, other than agricultural land, farm house or plantation (para 4.1) | Not covered by para 4 | Not covered by para 4 |
| Citizen of Pakistan, Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal, Bhutan, Macau, Hong Kong or North Korea (not an OCI) | Only with prior Reserve Bank permission, except a lease of up to five years (para 9.1) | Prior permission needed | Prior permission needed |
| Minority community citizen of Afghanistan, Bangladesh or Pakistan holding a Long Term Visa | One residential property for self-occupation and one for self-employment (para 5.1) | Subject to para 5 | Subject to para 5 |
Three points in that table deserve a closer reading. The restriction on the eleven listed countries does not apply to an OCI (para 9.2), so an OCI cardholder who also holds, say, a Sri Lankan passport buys on the same footing as any other OCI. The foreign spouse route needs the marriage to be registered and to have subsisted for at least two continuous years (para 4.3). And the farm-land bar is absolute for purchase and gift; the position on inheriting, holding and selling such land is set out in the agricultural land rules for NRIs and OCIs.
How the purchase price may be paid
Para 3.3.1 says payment must come out of funds received in India through banking channels by way of inward remittance from outside India, or by debit to an NRE, FCNR(B) or NRO account. Para 3.3.2 closes the other doors: payment cannot be made by traveller's cheque, by foreign currency notes, or by any other mode not listed. The Reserve Bank's FAQ on immovable property for non-residents repeats the same position.
In practice that means the builder or seller must receive the money from an Indian bank account, by cheque, NEFT, RTGS or a wire that lands in India. Carrying dollars in a suitcase and paying the builder in cash, or handing over foreign currency, is not a permitted mode at all.
All three account types are allowed for paying. They are not equal, though, when you later sell, which is where the next table matters.
| Source of money | Can it pay for the property? | Treated as foreign exchange for repatriating sale proceeds later? |
|---|---|---|
| Inward remittance from abroad through banking channels | Yes | Yes (para 8.2, condition 2) |
| Debit to NRE account | Yes | Yes |
| Debit to FCNR(B) account | Yes | Yes |
| Debit to NRO account | Yes | No, NRO is not in the list in condition 2 |
| Indian home loan repaid from remittances or NRE/FCNR(B) | Yes, for residential property | Yes, the repayments are treated as foreign exchange received |
| Indian home loan repaid from NRO, rent or a relative | Yes, for residential property | Not covered by the note under condition 2 |
| Traveller's cheques or foreign currency notes | No (para 3.3.2) | Not applicable |
If you are unsure which account your savings should sit in, the NRE vs NRO account comparison explains what each may receive and what can be taken out freely.
Taking a home loan from an Indian bank
Section 4 of the Reserve Bank's Master Direction on borrowing and lending in rupees (updated as on 8 September 2026) allows an authorised dealer bank to lend to an NRI or PIO for acquiring a residential accommodation in India. A housing finance institution approved by the National Housing Bank may do the same. The conditions are short:
- The loan amount, margin money and repayment period are on par with those for resident borrowers.
- The loan must be fully secured by an equitable mortgage of the property being bought, and the lender may also take a lien on other assets in India.
- The loan money cannot be credited to the borrower's NRE, FCNR(B) or NRNR account; it goes to the seller or builder.
- Instalments and interest can be paid from inward remittances, from the borrower's NRE, FCNR(B), NRNR, NRO or NRSR account, from rent earned on the same property, or by a relative in India paying straight into the loan account.
Two practical notes follow from the text. First, this route is written for residential property. A loan for a shop or office is outside section 4. Second, the direction speaks of NRIs and PIOs and does not mention OCI cardholders by name, so an OCI borrower should confirm with the lender how it applies the direction before signing the agreement to sell.
Whichever repayment source you pick has the same knock-on effect as the purchase payment. The note under condition 2 of para 8.2 of the property Master Direction says repayments made from remittances or by debit to NRE or FCNR(B) accounts may be treated as equivalent to foreign exchange received. Instalments paid from NRO, from rent or by a relative do not get that treatment.
A worked illustration of how funding affects a later sale
This is an illustration with invented figures. Anil, an Indian citizen working in Dubai, books a flat in Pune in August 2026 for ₹1,20,00,000. He pays it like this:
- ₹30,00,000 by transfer from his NRE savings account;
- ₹10,00,000 from his NRO account, where rent from an older flat in Nagpur accumulates;
- ₹80,00,000 through a home loan from an Indian bank, with every EMI paid by standing instruction from the NRE account until the loan closes.
Every rupee here was paid through a permitted channel, so the purchase itself is clean. Now look at it from the date he sells. The NRE payment of ₹30,00,000 and the loan of ₹80,00,000 repaid from NRE together make ₹1,10,00,000 of acquisition cost that meets condition 2 of para 8.2. The remaining ₹10,00,000 came from NRO and does not. The bank handling the sale will ask for proof of each leg, so Anil should keep the NRE statements for the booking, the loan account statement showing the source of each EMI, and the builder's receipts.
If Anil had paid all EMIs from the NRO account instead, only the ₹30,00,000 NRE payment would meet the condition. That one choice, made in 2026 to save a few rupees on conversion or out of habit, would shape the remittance options at the time of sale.
Selling later and sending the money abroad
Para 8.2 lets the authorised dealer bank allow repatriation of sale proceeds by an NRI or OCI when three conditions are met:
- the property was acquired under the foreign exchange law in force at the time;
- the purchase was paid in foreign exchange received through banking channels or from FCNR(B) or NRE funds;
- for residential property, repatriation is limited to not more than two such properties.
Commercial property has no two-property limit in that para.
Money that does not fit para 8.2 is not trapped. The Reserve Bank's FAQ notes that otherwise up to USD 1 million per financial year may be remitted, subject to conditions, through the NRO route. The steps, documents and tax forms are covered in the guide on repatriating property sale proceeds as an NRI, which also explains the TDS a buyer deducts when the seller is non-resident.
Rent, tax deduction and paperwork around the purchase
If you let the flat out, para 4.7 of the Reserve Bank's Master Direction on deposits and accounts treats current income such as rent as a permissible credit to the NRE account. The bank must be satisfied that it is current income and that income tax on it has been deducted, paid or provided for.
On the tax side, the buyer's withholding depends on who the seller is. When you buy from a resident seller at ₹50 lakh or more, the 1% deduction and the Form 141 process described in the guide to TDS on property purchase apply. When the seller is an NRI, the deduction falls under section 393(2) of the Income-tax Act, 2025 at the rates for non-residents, and the seller can apply for a lower deduction certificate.
On reporting, the Master Direction does not prescribe any filing with the Reserve Bank when an NRI or OCI buys property for personal use. The IPI declaration within 90 days in para 7.2 applies to a branch or office set up in India by a foreign entity, not to an individual buying a home.
Transferring or gifting the property onwards
Under para 3.2, an NRI or OCI may sell or gift any immovable property in India to a person resident in India. A transfer to another NRI or OCI is also allowed, but not for agricultural land, plantation property or a farm house. Where that transfer to another non-resident is a gift, the person receiving it must be a relative as defined in section 2(77) of the Companies Act, 2013. A gift of a Mumbai flat from an NRI uncle to an NRI nephew therefore needs a check against that definition before the gift deed is drafted.
