Things NRIs should Note Before Making Property Investment in India

Most of the non-resident Indians want to make real estate investment in India to expand their assets or if they want to buy a property in India in order to live here after retirement. To attract larger foreign investment, government has made it easy for NRIs to invest in properties. There are many appropriate real estate sites in India and if a Non-resident Indian who wishes to make an investment in India, one of the most important factors he should consider is the financial environment. Real estate transactions by NRIs are governed by Foreign exchange management act (FEMA)

So, there are 5 things an NRI should know before investing in real estate India.

• Type of properties

An NRI can only own commercial and residential properties in India. They are not even required to inform RBI about such purchases He cannot purchase any agricultural land, a plantation project or a farmhouse. They can only own such property if it is either inherited or gifted to him. There is no limit for the no. of residential or commercial properties that can be invested in.

• Payments

All monetary transactions should be in INR through regular banking channels using an NRI account like NRE/NRO or FCNR account. These are three types of accounts that an NRI can hold with the banks in India. The payment cannot be done by using a traveller’s cheque or using foreign currency. NRIs are allowed to finance the real estate purchase with a home loan in Indian rupees.

• Eligibility criteria for a home loan

If an NRI wants to fund his investment with the help of a banking or financial institution, 80â„… of the value of the property can be funded by a financial institution. All the transactions are done via banking channels, so have them remitted inward from NRO/NRE account or issue post-dated cheques or electronic clearance service from your NRE, NRO or FCNR account.

• Tax benefits

NRIs can invest in real estate sector in India and can save taxes like a regular Indian citizen.You can claim an overall deduction of Rs. 1 Lakh as per the provisions contained in the section 80 C of the Income Tax Act, 1961. Any profit made when you sell the property before two years of purchasing it is known as short-term capital gains and the earnings through the property are taxable.Returns from the sale of a property after two years from the date of purchase is considered long-term capital gains.You have the option to save the tax by investing in other property.

• Opting for an under-construction property

If an NRI plans to buy an under-construction property sites in India, he can give the power of attorney to a trusted associate like a relative or a friend to complete the deal.  When NRIs buy under construction projects, the builder may ask for a POA from them who can get all the paperwork done like contracts, deeds, mortgage or lease when the NRI isn’t in the country. Get the papers verified by the lawyer to avoid forgery and have secured investment.