Avoid These 7 Common Mistakes NRIs Make When Buying Real Estate in India

The Indian Real Estate is booming and investing in Indian real estate can be a smart and emotionally fulfilling decision for Non-Resident Indians (NRIs),  but the journey is not always a smooth sailing. NRIs often make mistakes that are avoidable during the property-buying journey. 

Here’s a guide to help you avoid the 7 most common pitfalls

1. Not Understanding Legal Eligibility

Can NRIs buy property in India? Yes, NRIs can purchase both residential and commercial properties, but there are restrictions on agricultural land, plantation property, and farmhouses. These properties can only be inherited or gifted. Ensure you are familiar with the rules laid out under the Foreign Exchange Management Act (FEMA).

🔹 Suggestion: Complete KYC norms with Indian banks, ensure you have a valid pan and always consult a legal expert to ensure you comply with RBI guidelines.

2. Overlooking Due Diligence

The most crucial and commonly made mistakes by NRIs is overlooking due diligence. Many NRIs rely on friends or family to scout and finalize properties. This can lead to legal troubles, financial losses, and long-term stress. This results in oversights regarding the title, encumbrance status, or litigation history of the property.

🔹 Suggestion: Ensure the property has a clear title and is free of disputes, check RERA-registeration (Real Estate Regulatory Authority) of the property. Hire a professional to conduct due diligence, especially if you are investing in high-value options like second homes or luxury vacation homes at holiday destinations. 

3. Ignoring the Power of Attorney (PoA) Process

A Power of Attorney (PoA) allows the NRI to authorize someone in India to act on their behalf for property-related transactions. Since NRIs usually reside outside India, managing real estate activities from abroad can be difficult or impractical without a trusted local representative. Without a properly executed PoA, managing your property transactions from abroad can become complicated and time-consuming.

🔹 Suggestion: The PoA holder that you hire should be someone reliable and competent. You must specify exactly what powers are being granted to him/her and you should use a format drafted by a qualified Indian lawyer.

4. Not Exploring Modern Investment Options like Fractional Ownership, REIT’s etc. 

Traditional property ownership isn’t the only route. Many NRIs are turning to fractional ownership real estate and fractional investing to reduce risk while diversifying assets.

What is Fractional Ownership?

It’s a model where multiple investors co-own a high-value property—such as a commercial office or luxury villa—and share rental income proportionately.

Claravest offers premium fractional property investment opportunities across India, enabling NRIs to benefit from fractional real estate investing in high-growth areas. Fractional ownership has a ton of other benefits like affordability, hassle free ownership etc.

🔹 Suggestion: Along with Fractional ownership, investing in  REIT’s is other modern investment option that NRI’s are turning to.

5. Overlooking Tax Complications 

Taxation laws for NRIs can be complex. Many NRIs assume that property taxes in India are simple or similar to their country of residence. However, the Indian tax system has its own set of rules for NRI property transactions—and ignoring them can lead to unexpected liabilities. Capital gains, TDS, rental income, and repatriation rules all vary based on holding period and investment type. To avoid double tax, check whether your country of residence has a treaty to avoid double taxation. Having a tax residency certificate can decrease TDS. Ensure you are filing ITR every year.

🔹 Suggestion: Consult a tax advisor to avoid future penalties and optimize your returns..

6. Falling for Unrealistic Promises

NRIs are often targeted by flashy ads and smooth-talking agents promising everything from "guaranteed returns" to "luxury homes delivered in 6 months." Some developers lure NRIs with glossy brochures  or “guaranteed” buy-back schemes.

🔹 Suggestion: Choose projects backed by a strong track record. Fractional Real Estate (FRE) platforms in India often aim to enhance transparency by involving third-party property managers and offering digital dashboards to provide investors with regular updates on property performance, occupancy, and financial returns. However, the level of transparency and the reliability of information can vary across platforms, and prospective investors should conduct thorough due diligence before committing funds.

7. Neglecting Exit Strategy

Many NRIs don’t think through how or when they’ll sell their property. They get so focused on buying property in India that they forget to plan for how they’ll eventually exit the investment. This can lead to liquidity issues or losses if the market underperforms.

Whether you’re buying for rental income, long-term capital gain, or future self-use—having a clear exit strategy is crucial. 

🔹 Suggestion: Set a clear goal and timeline for the investment. Choose locations with high resale demand and strong rental history. Keep all purchase and maintenance records updated for smoother sale and tax filing. With fractional real estate investing, exit strategies are usually predefined, offering more flexibility and quicker liquidation.

Final Thoughts

Real estate can be an excellent long-term investment for NRIs, but only when done with the right knowledge and preparation. By avoiding these 7 common mistakes, you can protect your investment, maximize returns, and ensure a smooth, stress-free experience.

From purchasing a second home to exploring luxury vacation homes at holiday destinations, consider modern options like fractional ownership real estate India to reduce risk and increase flexibility.