The real estate market is growing and the rupee falling, making investment in real estate in India a worthwhile option. Both commercial and residential property in India can be owned by an NRI. However, they cannot purchase any agricultural land, farm house and plantation property and can come into its ownership if it has been gifted or inherited. However, it is essential to comprehend the monetary requirements and legislations while purchasing property in India.
Here are some points which differentiate buying of property by an NRI and a resident in India:
No special permission is required by an NRI buying an immovable property in India . However, the payment has to be made using Indian currency, the Rupee, through funds received in the country by means of normal banking channels. These funds have to be maintained in a non-resident account under the foreign Exchange management Act (FEMA) and the Reserve Bank of India (RBI) regulations. There are also no limits set on the number of immovable properties which can be purchased, either residential or commercial.
Being an NRI, if you wish to invest into real estate in India then here are a few points to make the process easier and profitable for you-
1. Funding of the Property-
A maximum of 80% of the total value of property is allowed to be funded by any financial institution as per the RBI norms. For funding, you should be eligible and the property papers should be verified by a lawyer. For all new constructions, land title should be clear and the builder should have all approvals and permits from the local civic authorities in terms of construction. You need to also take a no dues certificate from the seller at the time of purchase to ensure there is no water, electricity or any other pending bills with the authorities. Also, your loan eligibity will depend on education qualification and profession. Like, only graduate NRIs can avail home loans in India.
Since all transactions must happen through the banking channel, repayment has to be done by inward remittances. You can directly get the money remitted from NRO/NRE account in India or issue post-dated cheques or Electronic Clearance Service (ECS) from your NRE, NRO or Foreign Currency Non Resident (FCNR) account.
Loan payments can also be made by cheques issued from a relative's local account or rent of property.
2. Possession of Property by NRI-
You are not required to take any prior permission from the concerned authorities. It is governed under Foreign Exchange Management Act (FEMA) Regulation (2000) which is a general authorization given to NRIs for the ownership and handover of residential property in India.
3. Passing the POI-
If you are purchasing an under-construction property, you may have to give a power of attorney (PoA). A PoA can be given to affect any contracts, deeds as well as mortgage, lease or even sell. You need to make sure the kind of authority you are giving to the person through the PoA. Ensure it is worded properly by a professional lawyer of your choosing.
4. Regulations on Sale of Property by NRIs:
Under the FEMA rules, if you are an NRI, you can sell any residential or commercial property bought or inherited by you to anyone .you have to search for a resident Indian to buy any inherited property or farmhouse . However, you are allowed to gift them to another NRI or the person of Indian origin.
You need to decide on whether you want money as repatriateble or not. "If you want to repatriate, it needs to come in foreign currency from an overseas account, NRE or FCNR account.
The other condition is that repatriation cannot exceed the foreign exchange amount paid for purchase of property through banking channels. Refund of application money, bayana, and advance on cancellation has no limitations. Also, it must be noted that an NRI cannot repatriate proceeds of more than two properties.
5. Tax effects-
To the tax benefits of a resident Indian is enjoyed by NRIs too who can claim deductions under 80C. Ensure that you buy or sell your property by knowing all the details and through proper channels to ensure a smooth and profitable process.
If you wish to invest in real estate, keep these points in mind and follow your path to success!