One of the most critical considerations for an NRI real estate investment in India is that he understands the financial landscape.
As per adherence to new real estate laws, buying a property for a non-resident Indians (NRI) is now easier than ever before. Any person with an Indian passport can invest in Indian real estate, except that the land or property should not be an agricultural land, a farmhouse or plantation property.
If you are an NRI and looking to invest in a property in India, here are a few tips you need to keep in mind before you start looking out for properties:
If you have an Indian passport, you do not need any previous permission to make a property investment in India. The Reserve Bank of India (RBI) has established various new rules which are very easy to encourage greater international investment. Property transactions are governed by the rules and regulations under the Foreign Exchange Management Act (FEMA).
Types of Real Estate Investment in India
There is no prohibition on the number of properties than an NRI can invest in. A Person of Indian Origin (PIO) as well as an NRI can buy several commercial and residential properties in India if they want. While, there is a restriction on foreign investment when it comes to plantation property, agricultural land, or a farmhouse. Such properties are allowed only in a situation they are gifted or inherited to the NRI.
Funding and Financial transactions
All the transactions should be made in Indian currency by Indian banks for any property investment in India. Hence, one of the needs is to have an NRI account in a sanctioned Indian bank.
An NRI can simply get funding for the investment if his paperwork documents are clean. There are various NRI home loan schemes available under different financial institutions in India. If you are getting your property funded, make sure that you have a least of 20% of the worth of the property to invest from your own sources. You can get funding for a maximum of 80% of the value of the property.
All your transaction should be transferred through Indian banking channels, so do ensure to use your NRO account and NRE account for all your inward remittances. You can also issue post-dated cheques or ECS from your NRE, NRO or FCNR (Foreign Currency Non-Resident) account.
Before you approach the bank for funding, make sure all your paperwork is clean and verified by a lawyer. Get a no-dues certificate from the seller if you are purchasing a property and if it’s jointly held or inherited, work to get the title cleared. Also, check that there are no pending bills or dues with any authorities.
In a situation, if you are purchasing an under-construction property, you will have to assign power of attorney to a trusted associate or your real estate builder. Take advice from your lawyer to appropriately word the document so that there is no risk of forgery and your investment is safe and secured while the property is being developed.
An NRI can enjoy most of the tax benefits that an Indian resident is entitled to on purchase of the property. A person can claim a discount of Rs. 1 Lakh under section 80 C on the Income Tax Act, 1961. In case you sell the property within three years of purchase, it will be recognized as a short-term capital gain, and the earnings through the estate are taxable. If you sell the property after three years, you have the choice of reducing the long-term capital gains tax by spending in another property.
The Confederation of Real Estate Developers Association of India (CREDAI) regularly organizes exhibitions for NRIs where it supports them scan different investment options and give spot loans from top banks. Simple investment options and reduction in down payment value are also given. Thus, it is essential that you must check all the offers from CREDAI before you do real estate investment in India.
Service: Property Assessment