Indian real estate
market has always been an attractive choice among the investors. However, when
it comes to NRI property buyers in India, the situation is different.
Volatility in the market and different rules and regulations governing realty
market for NRI buyers make it complex. For instance, RBI’s guidelines set
different restrictions for property types and payment methods for real estate
buyers not living in India.
Moreover, under Foreign
Exchange Management Act (FEMA), there are certain legal provisions for NRIs to
own an immovable properties in India.
To make property buying in India stress-free, NRI buyers should be aware of the
norms that differentiate them from other property buyers. Here are some
important points for NRIs who want to invest in property in India.
Special approvals
Though an NRI can buy
all kinds of immovable property in India,
they need special approval for agriculture land, farm house, and plantation
property.
Citizens of Pakistan,
Sri Lanka, Nepal, China, Bangladesh, Bhutan, and Afghanistan are not allowed to
buy or transfer immovable property in India. They can just own a property in
India on lease for a maximum of five years.
Documentation
To save time on buying
property in India, make sure you keep all the documents ready. As an NRI, you
need to possess a PAN card, valid Indian passport, OCI/PIO card in case of
OCI/PIO, passport size photographs, proof of work permit, address proof of the
home country and a notarized power of attorney to someone in India. To give
authenticity to the power of attorney, notarize it with the Indian consulate of
the country.
Payment methods
As far as payment of the
property in India is concerned, the investment can be made in Indian rupees
from the non-resident account maintained under FEMA and RBI policies or via
regular banking channels. Foreign investors are not allowed to make payment
through traveler’s cheque, by foreign currency notes and any other mode of
payment not mentioned in the guidelines.
Home loan
Banks and housing
finance companies registered with the National Housing Bank have got general
permission from the RBI to provide loans to NRIs to help them buy residential
property in India. However, the home loan amount for which NRIs/PIO are
eligible cannot be above 80 per cent of the total property price. To acquire
loan, the applicant needs to submit passport copies, employment contract, valid
visa, work permit, NRE/NRO account statement and salary certificate in addition
to basic documents
Further, as per the
regulations, banks and other financial institutions cannot credit the
sanctioned loan amount directly to the NRI's bank account. They need to
disburse it to either the seller's or developer's account. NRIs need to repay the
loan in the same currency by using funds in an NRO/NRE account or through FCNR
deposits.
Tax implications
TDS (tax deducted at
source) calculation for short-term and long-term capital gains on the property
sold by an NRI in India is done at different rates. TDS for long-term capital
gains is deducted at the rate of 20.6 per cent while for short-term gains the
rate is 30.9 per cent. Nevertheless, NRIs can save TDS deduction on capital
gains by either reinvesting the amount in an additional building or by
investing in tax excluded bonds.
Other tax obligation
laws for NRIs are exactly same as Indian citizens. From declaring Rs. 1 lakh real estate investment in India for
Section 80C's deduction to deduction for the interest paid on the home loan is
same as Indian tax payers.
To realize your dream of owning a property in India, you just need to keep these points in the mind and follow the right process. With new policies and regulations for NRI investors, the Indian government is making the realty market more lucrative, which is clearly visible through the increasing property demand by foreign buyers.
