Guidelines for NRIs to invest in Indian Real Estate
A Non-Resident Indian who wishes to purchase a property in India should be aware of the regulations that govern the acquisition and sale of the property. Non-Resident Indians (NRIs) are a big segment of investors, in the Indian property market. NRIs typically purchase properties in India for investment purposes or out of their emotional connection with their country and for settling down, once they retire. India has emerged as a lucrative spot for international capital.
Below are a few key points that NRI needs to keep in mind while investing in Indian Real Estate:
- Types of Property to Invest
NRIs can purchase any range of properties, both commercial and residential. However, they’re not allowed to purchase any form of agricultural land, plantation property or farmhouse unless it’s been inherited or gifted to them. The depreciating rupee value and the regulatory environment after the implementation of reforms is prompting an outsized range of NRIs to invest in the Indian Real Estate Market.
- Power of Attorney
Power of Attorney (POA) is needed by NRIs if they can’t be physically present in India for the execution of property transactions. It empowers an individual to act on behalf of another. Responsibility is delegated and therefore, it helps NRIs to manage their properties in India expeditiously. POA can be used for purposes primarily related to mortgage, sell, lease, manage and sell disputes, collect rent and borrow, perform acts required by banks and enter into contracts. The government is outlining to amend the laws to make registration necessary for such deals which can help curb frauds, disputes and stamp duty evasion.
- Tax Advantages
India has double taxation avoidance agreements with over ninety countries. AN NRI can claim the tax credit on taxes paid by them in India on income from immovable property in the country of residence. The NRI is prone to pay tax on the number of capital gains arising in India. Immovable property held for over twenty-four months is treated as a long-term capital asset and gets the indexation profit with taxation at 20%. Income-Tax Act permits certain tax deductions under Section 80C to 80TTA and NRIs can use this to cut short their tax burden.
- The Right Way to make Transaction
Investing in Real Estate in India isn’t any longer as difficult as it used to be. Most NRIs these days believe that the recent regulatory changes in India have made the sector more transparent and efficient, rendering the environment useful enough for investment in property. An NRI investing in India must have a list of things that ought to include property verification, list of all documents, payment plan, KYC, tax implication legalities and other local formalities and someone trustworthy to assist facilitate the entire process so that it is efficient and smooth.
- Regulation to Consider
Realty transactions in India for NRIs fall under the concept of the Foreign Management Act (FEMA). Reserve Bank of India has simplified the rules as NRIs holding an Indian passport needs no approval whereas investing in Indian Realty. Under the general permission category, persons of Indian origin need no approval unless they’re residents of neighboring countries. They can make payment through inward payment, non-resident ordinary rupee (NRO) accounts, non-resident rupee (NRE) accounts or foreign currency non-resident (FCNR) deposit accounts. Any property investment includes registration charges, stamp duty and service tax to be paid in line with Indian laws. NRIs are eligible to apply for loans in India however they should pay back the loan in Indian rupees solely.
