NRIs are the backbone of the Indian Forex economy. They transfer the majority of their earnings back to India to their family for both expenses and savings. The primary mode of savings for NRIs is Fixed or Recurring deposit followed by Real estate property investment. Investing in properties in India for NRIs is a tricky preposition. The rules and regulations for NRI property investment are governed by Foreign Exchange Management Act [FEMA]. This article will guide you in the process of real estate investment in India.
1. Types of property:
As per RBI guidelines, an NRI can easily purchase a residential and commercial property in India. The problem comes with farmlands, farm house, and plantations. Please go through these constraints before taking a decision. If you still prefer to buy agricultural land you need to seek approval from both RBI and state Government and it will be a long process. You should also first determine the objective of the property. The primary objectives could be
- Investment for capital appreciation
- Investment for rental income
- Self-occupation once you return
- Holiday Home
2. Housing loan:
Similar to an Indian citizen, an NRI is also eligible to get housing loans from banks and financial institutions for buying a property. The interest rate will slightly vary for NRIs compared to residing citizens. The loan will be issued in Indian Rupee[INR] and should be paid back in INR. The lending bank will disburse the loan amount directly to the builder account.
Taxation is India is still complicated and the recently announced GST and Real Estate bill are a move in the right direction. As an NRI you should understand the tax implications in India both at the time of investment and also at the time of selling. Please give importance to the following taxes
- Service tax at the time of registration
- Tax on Rental income
- Property Tax
- Capital Gain Tax at the time of selling.
It is highly recommended that you stay invested for a period of minimum 3 years to avoid short term capital gain tax.
This is the biggest hurdle and challenge in Indian real estate industry. Your property should get prior approval from many government bodies before construction and also after construction. Please make sure, all of those are done without fail. It is better to hire a legal consultant to verify all the regulations are met and all the documents are ready and complete.
5. Credibility of the Builder
This is the most important aspect while making your decision. It is extremely difficult for builders to hand over properties on promised date and time. Construction delays have become regular. Since you don’t have much time in India, it is highly recommended you choose only the most reputed builders who have a great historical track record. Do the necessary background checks or you might become a victim of the scams.
Please bear in mind the above-mentioned points before taking your decision to buy a property in India. It is strongly advised to buy from a trusted builder or hire a property manager to handle this.