Property prices have reached record highs in India over the past five years. However, for the Non-Resident Indians, a small increase as a result of the rupee’s decline versus the dollar has been the main factor. And because of this, their real estate investments in India have been incredibly profitable. Additionally, since the Union Cabinet passed the real estate regulation and development bill, property investments are improving in terms of consumer interest and becoming more transparent.
Are you an NRI seeking to invest in Indian real estate? You should be aware of the following:
- NRIs are permitted to buy both residential properties and commercial properties. NRIs are allowed to possess an unlimited number of properties, however, they are prohibited from purchasing plantations, agricultural fields, or farmhouses.
- NRIs are nevertheless permitted to inherit or receive a gift of agricultural land.
- An NRI can invest without being subject to any restrictions. Either they or a family member with Power of Attorney (POA) may make the investment.
- When purchasing a residence in India, NRIs are entitled to tax breaks equivalent to those received by Indian nationals. They can deduct up to INR 1 lakh under Section 80C of the Income Tax Act of 1961.
- Similarly, NRIs are eligible for stamp duty, registration, municipal taxes, and a 30% rent deduction. These are some of the advantages that inhabitants enjoy as well.
- Interestingly, NRIs can also avail of housing benefits like any Indian citizen. However, the documentation process is different.
- While a resident can claim a deduction of up to 1.5 lacks on home loan interest, NRIs do not have a fixed limit.
- However, NRIs must pay TDS at a rate of 1% for real estate worth more than INR 50 lakh. When selling the property, a capital gain tax is also assessed.
Eight factors that NRIs should think about before buying real estate in India
1. Property’s Nature
An immovable asset is a real estate investment. Although NRIs are entirely permitted to possess immovable property, whether it be residential or commercial, there are some limitations on the kind or nature of the property.
They are not permitted to own farmland, a farmhouse, or plantation property in India unless they are given to them as gifts or inherited, according to the Foreign Exchange Management Act (FEMA). However, they are permitted to own these kinds of properties in the nation with permission from the Reserve Bank and the government.
2. Taxes and Tax Advantages
An NRI must pay taxes on any income they get from immovable property, including rental income and short- or long-term capital gains, just like a regular citizen of the nation. However, the Double Taxation Avoidance Agreement (DTAA), which India has ratified with more than 85 nations, is a significant benefit they get to enjoy. This enables people to live and work in one nation while generating income through real estate investments or other means in another nation.
An NRI will be subject to a 20.6% tax rate on long-term capital gains if they hold onto a property for longer than two years. They are eligible to seek a TDS refund or a tax exemption under Sections 54, 54 EC, and 54 F just like any other Indian resident.
If the first property is empty and designated as being for private use, an NRI may be free from wealth tax on that asset. If they own numerous homes, a wealth tax of 1% will be due if their taxable net worth is greater than Rs. 30 lakh.
3. Home Loan
NRIs can apply for a home loan for up to 80% of the value of the property, just like any other Indian citizen. The sanctioned loan must be given in Indian rupees and must be repaid by the borrower in rupees as well.
When people take out a mortgage loan, the money is not immediately deposited into their bank account. The developer’s account is instead credited with the loan amount. When repaying the loan, payments made outside of India are not accepted in the same way that foreign cash or travelers’ checks are. How they will pay off their mortgage is obviously the question. The following are the solutions:
- Through banking channels, inward remittance
- Accounts NRO, NRE, and FCNR (B)
- Rent received
- Crediting a close relative’s account with the funds
4. Power of Attorney
The power of attorney is a strong legal tool that permits another person to act on behalf of the owner, typically someone they trust. Giving a power of attorney to a dependable person while purchasing an under-construction property in India as an NRI will make the entire ownership procedure simple and straightforward.
To prepare a power of attorney, be careful to enlist the help of a legal professional. It should ideally include all the information regarding the rights you wish your representative to exercise.
5. Remittance of Money to a Foreign Country :
Repatriation is the term used to describe the international transfer of money. Repatriation for an NRI entails transferring money from their bank account in their country.
When you sell immovable property in the nation and get money from the sale, you must follow certain rules in order to repatriate your money as an NRI.
The property must have been acquired in accordance with FEMA guidelines.
If the property was purchased with money transferred through banks or monies from an FCNR (B) account, the amount repatriated should not be greater than the amount paid for the property. The following are the exclusions from this requirement.
An NRI is permitted to repatriate $1 million in a fiscal year under the following circumstances:
- If the property was bought with rupee source funds, the money came from their NRO account.
- If the disputed item was given to the recipient as a gift.
- If a resident of India left it to them.
Repatriation of the sale earnings is permitted for a maximum of two residential properties.
6. FEMA Guidelines, which the Reserve Bank of India (RBI) controls
The Foreign Exchange Management Act (FEMA) has been loosened by the RBI to make it simpler for NRIs to own both residential and commercial properties in India. Except for the sorts of property listed above, they are permitted to own property with a current passport.
Knowing the most recent FEMA guidelines can be very beneficial to you if you are an NRI looking to purchase real estate in the country.
7. Payment Options
NRIs are qualified to receive up to 80% of the value of the property they wish to acquire, as we have already shown. The loan repayment must be done in Indian currency, just as the loan was disbursed.
Foreign exchange swings, however, can significantly harm your savings if the objective is to pay the EMI using money earned in the nation in which you currently reside. However, by choosing to pay the EMI using your rental income from the property, you can avoid such potential monetary pitfalls.
8. Remove the Middlemen
It is recommended that you buy a piece of real estate from a reputable builder if you are an NRI looking to invest in real estate in the country. You can save money and valuable time by doing away with intermediaries.
Consider, for instance, “The Silverdome Realtors ” Over the course of over 30 years, they have developed both residential and commercial properties all around the nation. In most of the states and cities, the organization is now present.
Along with creating first-rate themed residential developments, Silverdome realtors have constructed sizable facilities for prestigious Indian and international businesses. Known for its unrivaled quality, prompt delivery, and unwavering commitment to honesty on all fronts, buying a product from this company is an excellent choice.
1. What should NRIs know before investing in Indian real estate?
For NRI investors, real estate in India is the best option. An NRI should be aware of a number of considerations before making an investment to make sure everything goes smoothly. Knowledge of the different sorts of property one might invest in is crucial. For instance, an NRI cannot buy farmland, a farmhouse, or plantation property in India unless and until approval is obtained from the RBI and the Indian government.
Conditions for obtaining a home loan, taxation, advantages, giving power of attorney to a dependable person if purchasing a property that is still under construction, repatriation of cash, foreign taxes, and foreign perks are other crucial considerations.
2. How may an NRI invest in real estate in India?
An NRI can invest relatively easily in Indian real estate. In actuality, the procedures are the same as for an Indian resident, with a few exceptions. An NRI may apply for a home loan from an Indian bank or financial institution for up to 80% of the property’s value. However, the developer’s account receives the funds instead of the borrower’s.
It is advisable to give the power of attorney to a dependable friend or relative while the property is still under development. Finally, and most crucially, thoroughly research the developer’s background and reputation before making an investment in real estate. This will assist in making sure that the money remains safe.
3. What rules does the RBI have for NRI real estate investment?
The guidelines for NRI real estate investment in India have been spelled out in detail by the RBI. They are allowed to invest in all sorts of real estate, with the exception of agricultural land, farmhouses, and plantation properties.
They are entitled to tax breaks and home loans in the same way as other resident Indians. The money they have in their bank account in India from the sale of their property can be returned to them in their home nation. These are the most significant RBI regulations that an NRI investing in Indian real estate must follow.
4. What are the advantages of an NRI purchasing real estate in India?
For NRIs who engage in real estate in India, the RBI has approved a number of relaxations. According to this, an NRI who purchases real estate in the nation stands to gain in a number of ways. Here are a few examples: the Income Tax Act of 1961’s Section 80 C tax benefit. An NRI may benefit from a tax exemption if the property is purchased for personal use.
High rental income returns because demand for housing has increased as cities have expanded quickly. India now has a steady real estate market, which is anticipated to have rapid growth in the years to come. Naturally, a real estate investment is likely to multiply, providing NRIs with a good return on their investment.