After the recession started affecting the global economy, the real estate market in the Asian countries like India also came down quite significantly. In the last few years, more and more NRIs have started investing in properties. Moreover, the depreciation of Indian rupees has added fuel to real estate investment demand by NRIs.
Data of last 15 to 20 years should that flats in Bangalore and other metro cities in India have proved to be excellent investment options. However, all NRI citizens wanting to invest in India must make themselves aware of the real-time advantages, disadvantages, options, and procedures. Only then, they can expect to make money in the long run.
Reason to buy residential property in India
- The depreciation in rupee value has motivated many investors to explore the real estate of the country
- Acquisition & transfer of immovable Indian property has a simple procedure, which further encourages the NRIs to invest.
- Great offers are being rolled out up by the Association of Real Estate Developers (CREDAI)
- There are better tax rebates for NRIs planning to invest in the Indian real estate
Which kind of estate can be purchased by NRIs?
The FEMA and RBI regulations have specified the types of real estate investments that are allowed to NRIs.
How to acquire:
- Any immovable property can be acquired by them however it excludes farm house, agricultural land, and plantation property
- Any immovable property described above can be attained in the form of gift from the Indian citizen, Indian citizen residing outside, or a person with Indian origin.
- Property can be acquired as means of inheritance.
How to transfer:
- After the sale of immovable property mentioned above, the transfer must be done in the name of an Indian citizen.
- Transfer of farm house, agricultural land, or plantation land can in the form of a gift to an Indian citizen.
- Transfer of residential or commercial property as a gift can be done in the name of any person including, Indian resident living in or outside the country. It can be also be transferred to person of Indian origin
The RBI norms for NRIs to invest in Indian real estate are:
- Home loan is restricted to 80% of total cost, and the remaining 20% has to be endured by the NRI.
- The down payment can be made straightaway from the NRI’s current resident country through normal banking networks like NRO/NRE accounts in India.
- The repayment of principal and interest to the specific financial firms needs to be done in the same manner.
Tax implications for NRIs real estate investment
While finalizing the deal NRIs will have to pay the registration fee and stamp duty, but no extra tax will be incurred at that time.
- NRIs enjoy the same benefits as Indian residents on the interest paid towards their home loan.
- In case you rent the house then the tax procedure gets complicated. The income obtained will be treated as ‘Revenue from property’. The standard wedges will be relatable with average deductions also. The NRIs can however check for the Double taxation avoidance law, so that they don’t have to pay 2 times.
- All amounts re-paid as home loan is deductible from the NRIs taxable incomes without any upper-limits.
- Just in case, the NRI sells the property then they are liable for capital gains tax mentioned under IT Act.
What documents to check before purchasing real estate in India?
Investing in Indian real estate is a sensible move, but there are certain pitfalls that needs to be considered prior to investing –
- Property title – The house must be in the name of the seller or clear title. In case of joint or inherited property the seller must have the authority letter for selling it.
- NDC – No due certificate must be provided by the seller. It indicates that there are no outstanding electricity or water tax bills at the time of the sales.
- Bank release letter – If the house had been mortgaged as a collateral security then seller must provide the release letter from respective bank. The letter states that all the dues are cleared and nothing is pending
- Litigation – The house must be verified for any pending litigation.
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