How Can NRIs Invest in Real Estate in India

Introduction

If you are an NRI seeking to invest in India's commercial real estate market without the burden of property management, the Real Estate Investment Trusts (REITs) offer a streamlined alternative.

REITs allow you to invest in income-generating properties such as office spaces, malls, and warehouses through stock exchanges, combining the benefits of real estate ownership with the liquidity of equity investments.

This guide explains how NRIs can invest in REITs in India, covering eligibility requirements, the investment process, regulatory compliance, and tax implications.

What Are REITs and Why Should NRIs Consider Them?

Real Estate Investment Trusts (REITs) are companies that own, operate, or finance income-producing real estate across sectors such as commercial offices, retail spaces, and logistics facilities.

Listed on stock exchanges like the NSE and BSE, REITs are government by SEBI guidelines, with the following key provisions:

• REITs must distribute at least 90% of net distributable cash flows to unitholders.
• Minimum 80% of assets must be invested in completed, income-generating properties.
• REITs are required to publish quarterly financial statements and annual reports.

For NRIs, REITs eliminate traditional real estate challenges such as property maintenance, tenant disputes, and illiquidity. Key advantages include:

• Liquidity: REITs trade on stock exchanges, allowing you to buy or sell units anytime during market hours.
• Diversification: Exposure to multiple high-quality commercial properties without significant capital outlay.
• Passive Income: Regular dividend payouts from rental income, typically distributed quarterly.
• Transparency: SEBI-regulated REITs must disclose financial performance, occupancy rates, and property valuations.

India currently has operational REITs focused on office spaces, IT parks, and retail properties, offering NRIs regulated access to the country's growing commercial real estate sector.

What Are the Requirements for NRI REIT Investment?

NRIs can invest in REITs through the same process as resident Indians, provided they have:

• PIS NRE or NRO Bank Account: For fund transfers and dividend credits. NRE accounts allow full repatriation of principal and income, whilst NRO accounts have repatriation limits.
• Demat Account: To hold REIT units in electronic form.
• Trading Account: Linked to your Demat account for executing buy and sell orders on stock exchanges.

Kotak offers an integrated NRI account opening service under the 3 in 1 product offering. PAN is required for investing in REITs.

How Do NRIs Invest in REITs?

Step 1: Open Required Accounts

If you don't already have them, open an NRE or NRO savings account, Demat account, and trading account with an Indian bank and/or a brokerage. Ensure all accounts are linked.

Step 2: Fund Your Account

Transfer funds to your NRE or NRO account. NRE accounts can be funded from funds in your overseas bank account, or from other NRE accounts in India. Funds in NRE account are fully repatriable.

Step 3: Research Available REITs

Review listed REITs on NSE or BSE. Evaluate factors such as property portfolio quality, occupancy rates, historical dividend yields, and management track record. Financial portals and brokerage platforms provide detailed REIT performance data.

Step 4: Place Buy Orders

Log in to your trading account and place a buy order for the REIT of your choice, specifying the number of units and price. Orders can be market orders (executed at current price) or limit orders (executed at your specified price).

Step 5: Monitor Holdings and Receive Dividends

Once purchased, REIT units appear in your Demat account. Dividend income is credited directly to your linked NRE or NRO account.

How Are REIT Returns Taxed for NRIs?

Understanding tax treatment is crucial for optimising post-tax returns from REIT investments.

Dividends received from REITs for NRIs are taxed as under:

SPV has exercised the option for concessional tax regime - Taxable at applicable slab rates for NRIs. Tax Deducted at Source (TDS) is deducted at 10% (plus applicable surcharge and cess) before dividend credit to your account. NRIs can claim credit for TDS when filing income tax returns in India.

SPV has not exercised the option for concessional tax regime - Dividend shall be exempt in the hands of NRIs and TDS shall also not be applicable on such dividend income

Capital Gains

• Short-Term Capital Gains (STCG): Listed InvIT units sold within 12 months of purchase, capital gains will be chargeable to tax at 20% and if STT has been paid on sale of such units. In case of unlisted units sold within 24 months of purchase, capital gains will be chargeable to tax at the normal applicable slab rate.
• Long-Term Capital Gains (LTCG): Listed InvIT units sold after 12 months of purchase and Unlisted InvIT units sold after 24 months of purchase are taxed as Long-Term Capital Gains, taxable at 12.5%. Further, in case of listed units and where STT has been paid on sale of the units, the overall exemption limit of Rs. 1.25 Lakh shall be available against the gain computed u/s 112A of the Income-tax Act 1961 (Corresponding section 198 of the Income-tax Act, 2025). Double Taxation Avoidance Agreement (DTAA)

NRIs can claim relief under DTAA provisions to avoid paying tax on the same income in both India and their country of residence. File Form 10F with Indian tax authorities along with a Tax Residency Certificate (TRC) from your home country to claim treaty benefits.

Tax Filing

NRIs earning income from REITs in India must file income tax returns if their total Indian income exceeds the basic exemption limit. Maintain records of dividend statements, TDS certificates (Form 16A), and capital gains statements for compliance.

Conclusion

REITs provide NRIs with a transparent, liquid, and regulated avenue to participate in India's commercial real estate growth without property ownership complexities.

With the right account infrastructure—PAN, NRE or NRO account, Demat, and trading accounts—NRIs can invest in REITs following the same process as resident investors.

SEBI and RBI regulations ensure investor protection, whilst tax provisions under the Income Tax Act govern dividend and capital gains treatment.

Kotak Mahindra Bank offers comprehensive NRI banking solutions, including NRE and NRO accounts with integrated Demat and trading facilities, to support your REIT investment journey.

For assistance with account setup or investment guidance, reach out to Kotak's NRI banking team.