For most NRIs, real estate investment is a lucrative one, especially with the favourable exchange rate. Real estate developers have started focusing on NRI investors and they have plenty of options to choose from. If you are an NRI looking to invest in India, here are some tips that will help you make the right investment.
The Regulatory Act
The Reserve Bank of India acts as the governing body in India and the rules that it places are quite simple. The body places no restriction on the investments an NRI makes. An NRI can visit the country and directly make an investment or transfer Power of Attorney (POA) to a relative to get any transactions done. The rules for property contracts are regulated under the Foreign Exchange Management Act (FEMA).
For NRIs, purchasing a home in India can give benefits on par with the tax benefits that residents get. An NRI can claim a Rs. 1 lakh deduction under Section 80C of the Income Tax Act, 1961. There are further benefits if the NRI has taken a home loan to fund their purchase. A resident can claim a deduction of up to 1.5 lakh for home loan interest, but there is no such upper limit for NRIs. A 30% deduction on rent, deduction on stamp duty, registration charges, and municipal taxes paid, which is available to residents is available to NRIs as well.
While there are quite a few benefits, NRIs do have to pay TDS at 1% if your property is worth 50 lakh or more. If you are planning on selling your property, you would have to pay capital gain tax as given under the Income Tax Act. An NRI can, however, get long term benefits if you hold the property for over 36 months.
The processes and the rules are necessary while investing in a property. However, it is also essential to check the builder credibility. NRIs should assess the quality, amenities of the project and make sure that they are buying from a credible builder. NRI investors should check for past delays, approvals and licenses of the builder before making the purchase. It is a good idea to choose a reputed builder like Radiance Realty, who have proven track record.
An NRI, just like any Indian citizen, is eligible for housing loans in India. However, the documentation process is slightly different. Some of the crucial documents that NRIs need to have are:
- Valid visa and work permit
- Contract of employment
- Work experience certificate
- Salary certificate and statements of non-resident external (NRE) or non-resident ordinary (NRO)
Banks usually allow NRIs to borrow up to 80-85% of the value of the property. While a resident of India can avail tenure of 30 years, the tenure for NRIs ranges from 5 to 15 years. The repayments should be made through NRE/NRO accounts.
Type of transactions
An NRI or a Person of Indian Origin (PIO) can buy both commercial and residential property in India. There is no restriction on the type of assets or the number of assets or the size of the property an NRI can own. However, there is a limitation about owning an agricultural land. An NRI cannot buy a farm house or plantation property. They can own such a property in case they have inherited it.
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