Must Know NRIs guide for investing in Indian Real Estate
Real estate has always been a preferred investment destination for the NRI’s. Today, India has been an attractive investment destination, drawing attention from people over the globe. With the help of varied factors like low inflation, improved foreign relations, and interest rates, India is making highly favorable opportunities for investment. The latest research proves that NRI property investment is expected to surge by 35% (in the coming years) – mainly through property buyers residing in the US, Middle East, Canada, Australia, UK, and South Africa. Besides, there are many other reasons why NRI’s prefer to invest in the Indian Real Estate market, mostly because of the emotional security that comes with owning an asset in your motherland along with the revisions in legalities. But there are certain rules and regulations placed for NRI investment in real estate. So, it’s important for NRI’s to concentrate on certain factors before making a purchase decision. Further, read out these NRI rules or guide to investing in Indian Real Estate for a successful purchase of property in India.
Can an NRI purchase a property in India? - NRI rules or guide to investing in Indian Real Estate
The answer is yes! Any non-resident Indian who is interested in getting a property in India must be aware of certain legal provisions that pertain to owning immovable property in India (under the Foreign Exchange Management Act). Besides, NRI’s are also eligible to get a home loan and EMIs by way of proper banking channels and services.
Kinds of properties to invest in
Well, there is no limit on the number of properties that a non-resident Indian can invest in. An NRI can purchase many commercial and residential properties in India, as long as they want to. The investor must not seek any specific permission from RBI nor is he/she required to send intimation in anything regarding the RBI. The income tax also lets the NRI own as many properties as he or she pleases. In cases, where the NRI cannot come to India, certificates regarding the purchase must be executed by someone who holds the valid power of attorney.
Under the RBI there is a limit on foreign investment on properties, such as agricultural land, farmhouse or plantation property. Such properties are allowed only if those are gifted or inherited to the NRI in question. But if he or she wants to purchase a plantation or farmhouses, they must approach the RBI for specific permission.
What all documents do NRI require before making an investment in India?
For NRI’s planning to invest can rejoice as there are only a few documents required for the process. All they need is a passport, permanent account number, address proof, and a recent photograph if you are planning to invest.
What should be the origin of funds for the purchase?
For all financial transactions related to property purchase, NRI’s have to make payments from:
- Funds held in NRE/FCNR/NRO account in India.
- Funds remitted to India through common banking channels.
You cannot make any transactions using – A traveler’s cheque or foreign currency notes.
Power of Attorney
There have been numerous reports of NRI buyers getting cheated by builders and developers due to their absence in the country. This is why it is important for the NRI’s to give the power of attorney to the trusted builder or associate. Equally, they must also get help from the lawyer to word the document properly and ensure that there is no possibility of forgery – be it commercial or residential property.
Tax Benefits
NRI enjoys a majority of tax benefits that an Indian resident is entitled to. They can claim tax benefits for house purchases provided they have taken a home loan. If the individual sells the property or asset in a period of 3 years upon purchase, then this is regarded as a short term capital gain. Another good thing is that the earnings through the property are also taxable.
Rental properties of NRIs
NRIs are allowed to rent out their properties/assets in India and rental income is taxed at the applicable income tax slab. Like residents, NRIs can also claim a deduction for municipal taxes paid.
Joint ownership
An NRI can buy the property, whether it be a sole proprietor or partnership with the non-resident Indian.
Choosing a reputed builder
It is highly important to choose a builder who is backed by a very good reputation in the real estate industry. Since you may not be physically present to check upon the quality or the status of the building, you need to trust the builder you choose to invest in. A reputed builder will have all the clearances and certificates needed, which can help speed up the process of buying your home.
Make good use of the media, as most of the reputable builders in India have a social media presence for all their projects along with official websites, real estate portals and forums for real times updates on property investments.
Keeping regular track of the property/asset
It’s always mandatory to know the progress of the purchased property and NRI’s should be careful about it. They should not solely depend on social media updates for this task. Instead, should carry different options to do the same.
Understand the permissions granted by the Government
It is wise for any NRI investing in real estate to understand the different laws put in place by the Indian Government about leasing, owning, inheriting and entrusting of property for their own benefit as some of those properties gain exemption from tax.
Investing in commercial properties
If you are planning to invest in a property for the sake of returns, commercial investments could be a good target. It will ensure consistent returns and good capital appreciation. A well-located property can fetch around 6-10% returns on invested capital, almost double that of the returns on residential property.
In conclusion
Investing in the Indian real estate market can be very rewarding to the NRI’s. There are plenty of upcoming real estate projects which target the NRI’s and promise a high return on investment. Many NRI’s fall prey to such properties and end up purchasing multiple properties in India. So, it’s good you do your homework well. Seek out the right advice and make sure you follow all the rules and regulations carefully before investing in Indian real estate…
