Quick guide to NRI investment in Real Estate – 6 things you should know

Growing real estate market and with the rupee falling, real estate in India has become a worthwhile investment option and is enticing NRI’s who want to put their money and earn best returns over time. In general an NRI can own both commercial and residential property in India. However, they cannot purchase any agricultural land, farm house and plantation property and can come into its ownership if it has been gifted or inherited. If you are an NRI or have relatives who wish to invest into properties in India then here are a few points to remember to make the process easier and more profitable for everyone involved.

Funding of the Property

As per the RBI norms, a maximum of 80% of the total value of property can be funded by any financial institution. Lenders will be more than happy to fund your acquisition provided you are eligible and the property papers are verified by a lawyer. For all new constructions, land title should be clear and the builder should have all approvals and permits from the local civic authorities in terms of construction.

Possession of Property by NRI

The RBI's regulations on it are simple as well and you will not have to take any prior permission from the concerned authorities. It is governed under Foreign Exchange Management Act (FEMA) Regulation (2000) which is a general authorization given to NRIs for the ownership and handover of residential property in India.

Power of Attorney

If you are purchasing an under-construction property, your builder may ask for a power of attorney (PoA) approving them. This is not uncommon and would make documentation work somewhat easier and faster. A PoA can be given to effect any contracts, deeds as well as mortgage, lease or even sell. You need to make sure the kind of authority you are giving to the person through the PoA. Ensure it is worded properly by a professional lawyer of your choosing.

Payment Methods

The RB is strict about consideration amount for buying the immovable residential property by an NRI. The payments can be made either by funds referred to India by normal banking channel, or funds held in NRE/ FCNR (B)/ NRO account which is maintained in India. Remember that no payment can be made either by travellers’ cheque or by foreign currency and all payments need to be made in India itself. Since all transactions must occur via the proper banking channels, repayment has to be done by inward remittances.

Sale of property

Under the FEMA rules, if you are an NRI, you can sell any residential or commercial assets you have purchased or inherited to anyone you want. If you have any inherited agricultural property, you have to search for a resident Indian to buy it. Also, it must be noted that an NRI cannot deport proceeds of more than two properties.

Tax effects

A property is also a good tax saving tool for NRI and similar to the tax benefits of a resident Indian can be extended to an NRI who can claim deductions under 80C.

Ensure that you buy or sell your property by knowing all the details and through proper channels to ensure a smooth and profitable process.

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