NRI Real Estate Investment Process In India
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India is one of the best attractive real estate investment destinations, especially for the Non Resident Indian (NRI) population. A report by Square Yards, the total NRI Real Estate investment in primary Indian real estate in top 8 major cities is expected to reach around USD 11.5 billion in 2018. Thanks to the progressive regulatory reforms and ease of NRI investment process in India, the NRI investment sentiments have improved highly.
While market scenario is suitable for a real estate purchase, it is advisable for NRIs to understand the existing policies, reforms and laws governing their investment. To help them with the process, we have listed below some of the key laws that one should consider:
Ease of Buying Process:
Reserve Bank of India has eased the rules of buying a property by NRIs under the Foreign Exchange Management Act (FEMA). As opposed to earlier, they are no longer required to go through an sanction process with Foreign Investment Paper Board. Now, owning a property in India is an Indian passport away.
Real Estate Property Type:
An NRI can purchase residential as well as commercial properties in India. There is no cap on the number of properties that an NRI can buy in India. But, they are not allowed to buy any farm house, agricultural land, or plantations. These can only be owned if it is inherited or given as a gift.
Power of Attorney:
Now, actual presence of an NRI is not required for making a real estate transactions. A power of attorney (POA) is mandatory to simplify the investment procedure. In case of an under-construction property, a developer may require a POA that authorizes them for ease of documentation. Conversely, NRIs can issue a POA to a relative or a known Indian resident for accomplish all real estate dealings on your behalf, including registration, buying, selling, etc. However, care should be taken to get the POA prepared by a legal expert to avoid any misuse or fraud.
To secure funding for real estate transactions in India, an NRI must ensure all the paperwork is up to date, appropriate and in line with the laws. Moreover, NRIs must have an account with an authorised Indian bank. Also an NRI must be make all the transactions in Indian rupees only.
Various financial institutions in India offer several home loan schemes for NRIs. As per the norms laid down by RBI for securing funding, NRIs must ensure that at least 20% of the value of the property comes from personal resources and rest of the 80% can be financed through a bank or any other financial institution.
Again, one must keep in mind that these dealings have to be executed through Indian banking channel using NRO/NRE account for inward payments. Alternatively, one can also opt for post-dated cheques or Electronic Clearing Service (ECS) from the NRE, National Reconciliation Ordinance (NRO) or Foreign Currency Non Resident (FCNR) account for all these transaction.
A NRI can sell any of his/her property, commercial or residential to anyone. Somewhat similar to buying laws, while selling an agricultural land, farm house or plantations, NRIs have to make sure that the purchaser is an Indian resident or they can gift it to anybody, including an NRI.
When buying a home in India, NRIs are allowed to enjoy tax benefits that are similar to the ones enjoyed by the citizens of India. They can claim up to INR 1lakh of deduction under Section 80C of the Income Tax Act, 1961. Similarly, Non Residents Indians NRIs are eligible for deduction on registration, stamp duty, municipal taxes, and a 30% deduction on rent. These are some of the advantages enjoyed by an Indian resident as well. NRIs, however, have to pay Tax Deducted at Source for a property over INR 50 lakh at 1%. A CG tax is also imposed while selling the property.
As India is one of the fastest growing economies, now is the time for Non Residents Indians to invest in the Indian real estate market, especially with beneficial laws, tax benefits and surplus of options to choose from. At SOBHA Windsor, the offering ranges from apartments, row houses, villas to plotted developments to suit the needs of each and every customer.
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Noopur writes the content on real-estate from several years and she is one of the few writers who provide the thought provoking content on best properties deals.