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NRIs are eligible to apply for loans in India but should pay back the loan in Indian rupees only.
Chavvii Prabhakar
Global Indians are significant contributors to Indian forex reserves through remittances and investments in various Indian asset classes, of which real estate investments form a major chunk. NRIs, too, have always found investing in real estate to be a rewarding experience.
This, in addition to the depreciating rupee exchange value is benefitting NRI buyers significantly. The overall impact is that Indian real estate market is seeing green shoots of revival in 2018. The positive impact of the reformatory changes is already visible with the industry moving towards greater transparency, efficiency and accountability.
Below are some key points an NRI needs to keep in mind while making a real estate investment in India.
Power of Attorney
Power of Attorney (PoA) is required by NRIs if he/she cannot be physically present in India for execution of property transactions. It empowers a person to act on behalf of another. Responsibility is delegated and, therefore, it helps NRIs manage their assets in India efficiently.
POA could be used for purposes mainly related to mortgage, lease, sell, collect rent and borrow, manage and sell disputes, perform acts required by banks and enter into contracts. The government is planning to amend the laws to make registration mandatory for such deals which will help curb frauds, disputes and stamp duty evasion.
Tax Benefits
India has double taxation avoidance agreements with more than 90 countries. An NRI can claim tax credit on taxes paid by him in India on income from immovable property in his country of residence. The NRI is liable to pay tax on the amount of capital gains arising in India. An immovable property held for more than 24 months is treated as long-term capital asset and gets the indexation benefit with taxation at 20%. Income-Tax Act too allows certain tax deductions under Section 80C to 80TTA and NRIs can use this to reduce their tax burden.
Right way to make a transaction
Investing in real estate in India is no longer as challenging as it used to be. In fact most NRIs today believe that the recent regulatory changes in India have made the sector more efficient and transparent, rendering the environment conducive enough for investment in property.
An NRI investing in India needs to have a checklist of things which should include property verification, list of all documents, KYC, payment plan, tax implication legalities and other local formalities and someone trustworthy to help facilitate the entire process so that it is smooth and efficient.
Regulations to consider
Real estate transactions in India for NRIs fall under the purview of Foreign Exchange Management Act (FEMA). Reserve Bank of India has simplified the rules as NRIs holding an Indian passport needs no approval while investing in Indian real estate. Under general permission category, persons of Indian origin require no approval unless they are citizens of neighboring countries.
They can make payment through inward remittance, non-resident rupee (NRE) accounts, non-resident ordinary rupee (NRO) accounts or foreign currency non-resident (FCNR) deposit accounts. Any property investment includes stamp duty, registration charges and service tax to be paid according to Indian laws.
NRIs are eligible to apply for loans in India but should pay back the loan in Indian rupees only.
Type of property to invest
NRIs can purchase any number of properties, both residential and commercial. But they are not allowed to buy any form of agricultural land, farm house and plantation property unless it has been gifted or inherited by them. The depreciating rupee value and regulatory environment after the implementation of reforms is prompting a large number of NRIs to invest in the Indian realty market.
Also read: 5 steps to buy a house, for first-time home buyers
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Source: moneycontrol.com
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