It is being said that the growth in NRI
investments currently being witnessed in the real estate sector of India, was
last witnessed in 2012. In 2012, owing to dwindling Rupee, NRIs grabbed the
opportunity and constituted about 25% of the annual property sales. A number
that is usually in the range of 8-10%.
Depreciating Rupee is again touted to be one of the factors giving rise to this phenomenon since the NRIs will end up buying more square feet for the same amount of dollars. However, what has also helped are some government initiatives and policies like Pradhan Mantri Aawas Yojana, RERA bringing in the much-needed transparency in the real estate sector and the introduction of absolutely novel concepts like Real Estate Investment trusts (REITs). Owing to all this and many initiatives undertaken by various developers, today 78% of the NRIs prefer investing in real estate vis a vis mutual funds or other types of financial investments.
Let us now get down to the practical aspect
of it. If you are an NRI looking to invest in Indian real estate, what are your
options? What must you keep in mind? Allow us to break it down for you-
Check EligibilityReal estate transactions in India fall under the purview of Foreign Exchange Management Act (FEMA) and FEMA is clear on two things:
Real estate transactions in India fall under the purview of Foreign Exchange Management Act (FEMA) and FEMA is clear on two things:
- An NRI cannot invest in
agricultural land or land bought with the purpose of farming/ a farmhouse.
- If you are a citizen of Pakistan,
Bangladesh, Nepal, Sri Lanka, Iran, Bhutan, Afghanistan, China; you become
Open a bank account
Unfortunately, the dollars do not come in handy when purchasing a house. The NRIs are required to open bank accounts that are either Non-Resident External accounts (NRE) to transfer the money internationally or Non-Resident ordinary accounts (NROs) to manage the income earned within India. All your home purchase transactions shall be carried out using these accounts only.
Consider a home loan
An NRI, like any Indian citizen, is eligible for up to 80% home loan from the banks. So, why not? A few things to be kept in mind is that you shall need an Indian as a co-applicant compulsorily. Also, there is a minimum number of years of work experience required overseas to qualify.
Remember the taxes
Taxes arise when you earn an income from the house you have bought and thus, can be of two types- income from sale/transfer of the property and income from the rental amount earned. For the former, depending on the tenure of holding of property, the capital gains are taxed. If it is held for less than 24 months, it is short term capital gain and is taxed as per the normal tax slabs of India. Else if it is held for more than 24 months, it is long term capital gain and is taxed at 20% (extra surcharge and cess).
For the latter case i.e. rental income, the
annual value of the property is determined and deductibles like municipality
tax, repair and maintenance and home loan interest are calculated. The rest is
then taxable as per the Income Tax Act.
At Provident Housing, we do not differentiate between resident and non-resident Indians and aim to serve all with equal fervour. We even have a home loan team to help you get through the process with minimum roadblocks. Even if you are stationed out of India, a legally valid Power of Attorney (PoA) to a known person here will suffice. Whether you are looking for flats in Chennai/Coimbatore or apartments for sale in Mangalore/Hyderabad/Bengaluru; we are your one-stop-solution!
The data and information provided in this article are reliable but only
suggestive and informative. This is meant to be consumed for general
information purpose only.