How to Legally Buy Coastal Property Abroad as an Indian National: The FEMA Reality

Every year, thousands of Indian HNIs return from a trip to Portugal, Albania, Dubai, or the Maldives having seen a piece of land or a coastal villa they want to own. They ask their CA. The CA looks vaguely uncomfortable. A follow-up call is promised. Three weeks later, the conversation has gone quiet and the opportunity has passed.

This is not because buying property abroad as an Indian resident is impossible. It is because the mechanics are genuinely complex, the compliance requirements are underappreciated, and the consequences of getting it wrong — especially in a regulatory environment that is tightening measurably — are serious enough that most advisors default to caution rather than clarity.

What follows is an honest accounting of how the system actually works, what the limits are, what Indian HNIs actually do when those limits are insufficient, and why the regulatory risk calculus changed materially in late 2025. This is not legal advice. It is the informed briefing you should have before you walk into your advisor's office.

The LRS Framework: What the Rules Actually Say

The Liberalised Remittance Scheme (LRS), introduced by the RBI in 2004, is the primary legal mechanism for resident Indians to move money abroad. The RBI's LRS permits resident individuals to remit up to USD 250,000 per financial year (April to March) for permitted capital account transactions, including buying property abroad. The scheme resets every April 1. Unused limits do not roll over.

The purchase of immovable property outside India is explicitly allowed under LRS. This includes both residential and commercial property. The remittance must be routed through an authorised dealer bank — any scheduled commercial bank in India — with a specific purpose code.

For property purchases, the purpose code is S0005 — Indian investment abroad in real estate. Banks will insist on a Sale and Purchase Agreement or equivalent closing documents before processing the transfer. Using the wrong purpose code can lead to reporting mismatches under FEMA.

This is where the first gap between theory and practice appears. A coastal villa in Sardinia, a flat in Mayfair, a plot in Albania's Riviera — at any price point that a genuine HNI would consider worth owning — typically costs far more than USD 250,000. The arithmetic is straightforward: the LRS limit, for most luxury real estate, is not a solution. It is a downpayment mechanism at best. For those exploring the broader market, our coverage of global luxury property market trends and growth provides useful context on where prices are heading.

The Family Pooling Strategy: Legal, But Limited

The USD 250,000 limit applies per person, not per family. Both spouses, as resident Indians, can collectively remit up to USD 500,000 in a financial year for overseas property, provided the funds originate from their individual accounts.

In theory, this can be extended further. A property worth USD 500,000 can be partly funded by remitting USD 250,000 from India and financing the balance through an overseas loan. However, under FEMA and the ECB framework, resident individuals are not eligible borrowers for overseas loans in foreign currency. A resident Indian cannot walk into HSBC UK and take a dollar- or pound-denominated mortgage.

The practical ceiling for a fully compliant resident Indian couple using LRS alone: USD 500,000 per financial year. For a property in any desirable coastal location globally — whether Algarve, Côte d'Azur, Oman, or Greece — that ceiling eliminates most of the market. An Aman villa in Montenegro starts at €2 million. A waterfront plot in Musandam commands $800,000–$2 million. A Quirimbas island lease runs into seven figures. For those drawn to private island ownership, our feature on how the wealthy buy private islands as residences explores the lease and ownership models used globally.

The gap between what LRS permits and what HNIs want to own is the gap where structuring complexity lives.

What HNIs Actually Do: The Structures in Use

The most common approaches used by Indian HNIs to acquire foreign real estate beyond the LRS ceiling fall into four categories. All exist on a spectrum from fully compliant to legally grey to outright FEMA violation. The distinction matters considerably, particularly post-2025.

1. Multi-year accumulation via LRS

The simplest and fully compliant approach: a couple remits USD 500,000 per year for two to three years, accumulating a USD 1–1.5 million foreign currency pool to fund acquisition. This requires planning the purchase two to three financial years in advance and is only feasible for properties in lower-cost markets. Patience is the price of compliance.

2. NRI family member as purchaser

An NRI — typically a child studying or working abroad, or a sibling with established foreign residency — acquires the property directly. NRIs face far fewer restrictions than resident Indians on overseas property purchases; they can fund from NRE accounts without LRS constraints. The resident Indian family then uses the property as a de facto second home. This is legally clean if the NRI genuinely funds the acquisition and the property is legitimately in their name.

Where this becomes problematic: when the economic substance is Indian-resident-funded but the name is borrowed. FEMA prohibits having a relative or friend abroad pay on your behalf for property effectively owned by a resident Indian — informal arrangements of this kind are prohibited. The Enforcement Directorate has increasingly sophisticated tools to trace economic substance behind legal ownership.

3. Overseas company acquisition

A foreign company — incorporated in a permitted jurisdiction — acquires the property, and the Indian resident holds equity in that company. The equity investment in the foreign company can be structured through LRS (equity investments in overseas companies are a permitted LRS use), though the total investment is still subject to the annual limit. The complexity lies in ongoing compliance: the foreign entity must be reported under FEMA's Overseas Direct Investment (ODI) framework, and all income from the property must be declared in India.

4. Offshore discretionary trusts

For many years, the preferred structure of Indian HNIs was the offshore discretionary trust — typically Jersey, Isle of Man, or Singapore — where the beneficiaries are Indian residents but the assets are held at trust level. The tax logic was that until the trust distributes, no Indian tax liability accrues. Offshore discretionary trusts were rampantly set up by HNIs in low or nil tax jurisdictions to escape tax in India, with the presumption that until the trust does not distribute income or assets, no tax liability can be fastened on the beneficiaries who are Indian residents.

That logic was neutralised by GAAR, which came into effect on April 1, 2017. General Anti Avoidance Rules state that a transaction or arrangement where the only purpose is tax benefit can be treated as an impermissible anti-avoidance arrangement and disregarded by the Assessing Officer. If the offshore trust is found to be a sham, PMLA and Benami Transactions Prohibition Act provisions may apply. If FEMA contraventions are noted, equivalent assets of the settlor in India may be attached.

The trust is not dead as a structure. Trusts with genuine estate planning purpose — multi-generational wealth transfer, asset protection in politically uncertain markets — retain legal validity. Trusts whose sole purpose is to hold a Maldives villa outside the Indian tax net are a different matter entirely.

The 2025 Regulatory Shift: Why the Risk Calculus Changed

This is the section most luxury property articles skip. They shouldn't.

High-risk individuals are being sent SMS and email alerts by the Income Tax Department to revise and declare their foreign assets and income, failing which they risk heavy penalties. The Income Tax Department today possesses an unprecedented degree of visibility into offshore financial holdings of Indian residents, primarily on account of India's participation in the OECD Common Reporting Standard (CRS) and the FATCA framework with the United States. Through these automatic-exchange mechanisms, the Department receives annual, account-level information from over a hundred jurisdictions, including details of beneficial ownership, balances, investment income and, in several cases, the corporate or trust structures through which such assets are held.

This is not a theoretical risk. Over a hundred countries now automatically share financial account data with India annually. The era of the undisclosed Dubai apartment or the Albanian plot held through a shell company is functionally over for anyone who intends to remain an Indian resident. The relevant question is not whether the IT Department will find it. It is when. For background on how Indian HNI buying patterns in Dubai have evolved, see our analysis of why Indian business owners are buying Dubai real estate.

Under CBDT's "Nudge" initiative, settling taxes does not shield individuals from far more serious legal scrutiny. PMLA and FEMA violations can still trigger investigations even after payment. The penalty structure under FEMA for contraventions involving foreign property ranges from monetary penalties to seizure of Indian assets equivalent in value to the offshore holding. In serious cases, criminal prosecution is possible under PMLA. Worth comparing alongside our piece on everything you need to know about luxury tax to understand the broader tax landscape affecting wealthy buyers.

The practical upshot: the cost of non-compliance is no longer asymmetric. For several years, the informal calculus was that the probability of discovery was low and the worst case was a back-tax payment. That calculus no longer holds.

The NRI Advantage: What Genuine Non-Residency Unlocks

The cleanest route to foreign coastal property ownership for someone in the Indian UHNW ecosystem is genuine non-residency. An Indian who spends more than 182 days outside India in a financial year — actually lives abroad, not merely parks their passport somewhere — acquires NRI status under FEMA and the legal landscape changes substantially. The scale of this shift is captured in our report on millionaire migration to UAE, Italy and Portugal in 2025, where 142,000 ultra-rich individuals are reshaping global residency choices.

NRIs can purchase foreign property without LRS restrictions, fund from NRE or FCNR accounts freely, and face no cap on the number or value of overseas properties held. Indian income still attracts Indian tax for Resident and Ordinarily Resident (ROR) individuals, but for someone who genuinely relocated — many Indian founders and senior executives are doing exactly this in Dubai, Singapore, London — the foreign property question simplifies dramatically.

The next-generation angle is relevant here. Adult children of Indian HNIs who are studying or working abroad are de facto NRIs, often with more flexible cross-border financial flexibility than their India-based parents. The multigenerational wealth transfer dynamic in Indian families means that a property acquired by a London-based child of a Mumbai industrialist can serve a family function even if the parents remain Indian residents who visit rather than own. London continues to be a magnet — our coverage of the essence of luxury real estate in London explains why.

The TCS Complication: April 2025 Changes

One practical change that affects even fully compliant LRS remittances: Tax Collected at Source on outward remittances was restructured from April 2025. Remittances above ₹10 lakh per financial year — the threshold raised from ₹7 lakh under Budget 2025 — attract TCS at 20% for most purposes including property purchase. This TCS is creditable against final tax liability, so it is not an additional tax — it is a cash-flow cost that must be refunded via ITR. For a couple remitting USD 500,000 (roughly ₹4.2 crore), the TCS hit of 20% means blocking approximately ₹84 lakh until the refund is processed. At scale, this is a meaningful working capital consideration that advisors frequently underestimate.

What Compliant Acquisition Actually Looks Like: A Working Framework

For an Indian resident couple with a target acquisition value of USD 1–2 million:

Acquisition above USD 1 million requires multi-year planning or a genuinely offshore-resident co-owner. Any structuring beyond this baseline needs jurisdiction-specific legal advice from counsel qualified in both FEMA and the target country's property law — not a CA who primarily handles Indian returns. For broader principles of acquiring high-value homes, our guide on the art of buying a luxury home is a useful companion read.

Country-Specific Flags for Indian Buyers

UAE (Dubai/Abu Dhabi)

Most popular market for Indian buyers. Freehold purchase permitted by foreigners in designated zones. LRS-compliant purchases fully accepted by UAE authorities. Indian tax treatment: rental income taxable in India, capital gains on disposal taxable in India (no tax treaty in India's favour on property gains from UAE). FATCA/CRS: UAE shares data with India. Among the most-discussed recent launches is our review of the Sobha SeaHaven Tower waterfront apartments at Dubai Harbour.

Portugal

Golden Residence programme changes (2023 onwards) have restricted property-linked residency routes. Direct property purchase remains possible. LRS-compliant. Rental income and gains declared in India. EU property law applies. Family office activity in Portuguese coastal property continues — see our piece on the Finnish family office investing 30 million euros in Algarve for a comparable institutional approach.

Albania/Emerging European markets

Relatively permissive purchase laws for foreigners. Low transparency on title, cadastral registry issues common. FEMA-compliant purchase possible via LRS. Political risk and rule of law risk are real — the Sazan Island case is instructive. Require independent legal due diligence.

Mozambique/African markets

Foreign ownership rules vary by country. Mozambique does not permit foreign freehold ownership of land — only leasehold up to 50 years (DUAT title). Purchase of lodge equity, not land, is the working model. Structuring requires local counsel.

Maldives

Foreign nationals cannot own land. Long-term lease of resort properties and developer units (typically 99-year leasehold) is the mechanism. LRS-applicable for the remittance component.

The Principle

The Indian government has not made buying foreign property illegal. It has made it specific, documented, and increasingly transparent. What changed in 2025 is not the rules — it is the enforcement capacity. CRS has effectively ended offshore opacity for any Indian resident whose foreign financial institution is in a participating country (which is almost all of them now).

The HNIs who navigate this correctly are not the ones with the most aggressive structures. They are the ones who planned the purchase three years before they made it, involved FEMA counsel alongside the CA, and treated the foreign property as part of a declared wealth strategy rather than a financial secret. The others are in the CBDT nudge list. For context on how Indian wealth is increasingly favouring tangible assets, our analysis of why India's rich prefer land investments over apartments captures a parallel shift in domestic allocation.

FAQ

What is the maximum amount a resident Indian can remit abroad to buy property in 2025–26?

USD 250,000 per individual per financial year under the LRS, purpose code S0005. A couple can pool to USD 500,000. The limit resets every April 1. TCS at 20% applies on the portion above ₹10 lakh (refundable via ITR). There is no mechanism for a resident Indian to borrow in foreign currency to fund the balance — self-funding only.

Can an Indian resident buy a property worth ₹5 crore in Dubai legally?

Yes, over multiple financial years via LRS accumulation. A couple remitting USD 500,000 per year would need approximately two to three years to fund a ₹4–5 crore acquisition, depending on exchange rates. Alternatively, if one partner is a genuine NRI, they can fund their share without LRS constraints. The purchase and all rental income must be declared in the Indian ITR under Schedule FA and foreign income schedules.

What are the penalties for an Indian resident who bought foreign property without FEMA compliance?

FEMA penalties range from monetary fines up to three times the value of the contravention, to attachment of equivalent Indian assets. Undisclosed foreign assets are also subject to the Black Money (Undisclosed Foreign Income and Assets) Act 2015, which prescribes a flat 30% tax plus 90% penalty — effectively 120% of the asset value — plus potential prosecution. Post-2025, CRS data exchange means discovery risk is high for any property in a participating jurisdiction.

Do offshore trusts still work for holding foreign property for Indian residents?

Offshore discretionary trusts set up purely to defer Indian tax on foreign assets face GAAR challenge — a trust arrangement with no genuine purpose other than tax avoidance can be treated as impermissible. Trusts with genuine estate planning, asset protection, or generational wealth transfer rationale retain validity but require full FEMA compliance and CRS reporting. FATCA/CRS means the trust's existence and beneficiaries are reported to India automatically by most offshore jurisdictions.

Is an OCI cardholder treated differently from a resident Indian for foreign property purchases?

OCI cardholders who are non-residents (not domiciled in India for FEMA purposes) have NRI-equivalent rights for most financial transactions and face no LRS constraint on foreign property. OCI cardholders who are resident Indians — who live and work in India despite holding an OCI card — are treated as resident Indians under FEMA and subject to the same LRS limits. Residency under FEMA is determined by physical presence, not citizenship or document type.

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