Real estate is the only sector that always snares the attention of non residents. With the deterioration of rupee value, India became as a conspicuous investment destination for NRI’s. Whether the realty market is hot or cool, NRI’s like to invest in India as the Indian realty market provides lucrative investment opportunities to non residents who want to invest in India. In addition, Indian Government is also coming up with new schemes to lure investors’ interest.
Nonetheless, the rules and regulations are a little bit complicated. The reason behind this is only to ensure genuine flow of money and to evade illegal transaction. Here are the few things that NRI’s ought to keep in mind before investing in Indian real estate market.
Confirm whether you come under NRI Category: The foremost thing that every Non-resident investor should do is to affirm whether he/she categorizes as a Non Resident Indian or not. Taking into account the residential status, the Indian Income Tax Act classified individuals in to two categories Residents and Non-Residents. Further, residents classified into ROR (Ordinary Residents) and Non Ordinarily-Resident (RNOR).
As per the Foreign Exchange Management Act (FEMA), a person of Indian origin will be considered as NRI, if the person He/she stays in India for a period of less than 182 days amid the preceding year (April to March) or stayed in abroad for more than 182 days for education, employment, business and other purposes.
Even if the individual is a foreign citizen, the person can also be treated on par with NRIs by considering as a person of Indian origin if he/she has an Indian passport or any of your family members like spouse, grandparents, and parents were Indian citizens. The residents of Bangladesh and Pakistan are not qualified to be as NRIs.
Review the market situation: Due to the recession and economic down turn, many Indians working in abroad become anxious about their job security and financial stability. Do thorough research on financial situation and property rates to invest in India-home country. Consider exchange rates and tax associated with investment. The Indian realty market is performing great from last few decades, even in sluggish conditions also one can invest in India for better returns. Due to the sudden growth of the population, in Indian cities outskirt localities are also emerging as best performing areas.
Investment Destination: Once reviewed the market condition decide the investment destination where to invest by doing research online. Better to choose a property close to relatives and friends homes as this will make certain that a sale deed can be registered effortlessly. Furthermore, they will look over the property in the absence.
Home loans: Now a day, NRI can obtain a home loan for any type of property whether it is ready to move, under construction, property development on owned plot and renovations to existing property. To avail home loan Educational background plays a major role as only graduates can apply for Home loan. When choosing the bank consider maximum mount range. Some banks also allow equated monthly installments. Document requirements differ from bank to bank. Choose the bank which offers less interest rate.
Choose which bank Account to Repay: To attract the customers, many banks and financial institutions offers alluring offers and interest rates. To repay the loan amount choosing the type of account is important. For NRI’s there are three accounts, namely NRE, NRO and FCNR.
NRE (Non Residential External): In this account, funds in foreign currency are transformed into Indian Rupees. The exchange rate in the time of transaction will be used for conversion. The principal amount can be transferred easily to a foreign account.
NRO (Non Resident Ordinary): This type of account allows NRI to transfer Indian earnings and to deposit foreign funds. The interest income earned on the principal is subject to an income tax deduction in India. Tax deducted at source @ 30 percent with education cess and applicable surcharge. Funds in this account can’t be deported abroad.
FCNR (Foreign Currency Non-Repatriable): This FCNR account is a fixed deposit account in foreign currency and not a saving account.
Tax implications for both NRI and Indian Residents are very similar.
Points to Note: NRI can make an investment in any type of property except agricultural land without any limitations, but there are a few drawbacks. Any type of investment made by a non-resident in India is led by FEMA. To secure the deal, NRI should consider the following factors.
- Property name ought to be clear without any issue and ensure that the owner has a right to sell the property.
- Ensure that there is no pending electricity and water bills, better to obtain no due certificate from the seller while purchasing.
- Make sure that the purchase agreement is filled with foreign particulars.
- NRI shouldn’t hold a property with another resident (Indian or foreign)
- NRI only can sell the property after completion of three year lock in period from the date of procurement.
- Returns obtained from investment cannot be repatriated to India as dividends.
Buying a residential property in the home-land is a dream for many NRI’s. Keep in mind and consider all the points for safe investment.
