X

Get in Touch

Finlace Consulting’s NRI Realty Solutions

Indian Real Estate market is one of the most robust and fast growing property markets in the world. Jones Lang LaSalle, the leading International investment consultant firm, has ranked India and China at the top on its list of 20 nations globally chosen on the basis of their growth potential in the real estate sector in 2012.

As an Indian citizen overseas or as a PIO, you are fully entitled by the law to invest and profit from the Indian Real Estate market. But there are certain complexities faced by the non-residents in terms of, difficulty in:

  • Exploring the various options.
  • Evaluating a particular project based on on-ground situation.
  • Scouting for the best deal.
  • Applying for bank-loan.
  • Understanding the government regulations for overseas investment.
  • Paper-work.
  • Monitoring progress report post-investment.
  • Leasing out / reselling the property post-possession.

Finlace Consulting’s NRI Realty Solutions (FNRS) serves to address these barriers. The package along with our resolution to bring professionalism and transparency in Real Estate in India offers a complete peace-of-mind solution to the non-resident investors and home-buyers.

Buying Property in India

Risks associated while buying in India

While investing in real estate in India can be a smart move there are several pitfalls which one needs watching out for in order to secure the investments.

Tax Implications for Buying Property in India

The NRI will have to pay the stamp duty and the registration fee while purchasing but will have no additional tax due at the time of the purchase.

 

Selling a property in India

  • NRI can sell residential or commercial property in India. He can sell to:
    • A person resident in India (the definition of resident in this case will be as per FEMA)
    • An NRI
    • A Person of Indian Origin (PIO)
  • However, an NRI can sell agricultural or plantation land or a farm house only to a person who is resident in India and a citizen.
    • In which account must the sales proceeds be credited?
  • There are two scenarios that may arise here:
    • Sale of property purchased as a resident Indian: The sale proceeds in such cases would have to be credited in the Non Resident Ordinary (NRO) Account.
    • Sale of property purchased as a non-resident Indian: If the property was purchased out of rupee resources, that is, income earned in rupees, or the home loan is repaid by a relative who is a resident of India, the amount must be credited in the NRO account.

Can such propery be sold without the permission of Reserve Bank?
Yes. Reserve Bank has granted general permission for sale of such property. However, where another foreign citizen of Indian origin purchases the property, funds towards the purchase consideration should either be remitted to India or paid out of balances in non-resident accounts maintained with banks in India.


Can sale proceeds of such property if and when sold be remitted out of India?
In the event of sale of immovable property other than agricultural land/farm house/plantation property in India by an NRI or PIO, the authorized dealer may allow repatriation of the sale proceeds outside India, provided all the following conditions are satisfied: -

  • NRIs/PIOs can effect remittance of sale proceeds of immovable property in India irrespective of the period for which the property was held. The sale proceeds allowed to be repatriated should, however, not exceed the foreign exchange brought in to acquire the said property.

  • In case of residential property, the repatriation of sale proceeds is restricted to not more than two such properties, if the property was purchased from funds held in NRE Account.

  • The amount sought to be repatriated abroad should not exceed the amount paid for acquisition of the immovable property in the foreign exchange received through normal banking channels or out of funds held in FCNR or NRE Account. In case of investment out of NRE Account the amount to be calculated as foreign currency is equivalent value as on the date of payment for acquisition of the said property.

Tax applicable on sale of properties in India

  • If the property is sold after 3 years from the date of purchase, the tax liable for long term capital gains tax of 20 per cent.
    • The gains are calculated as the difference between sale value and indexed cost of purchase. Indexed cost of purchase is nothing by the cost of purchase adjusted to inflation.
  • As an NRI, it will be subject to a TDS of 20 per cent on the capital gains. If the property is sold within 3 years of purchase, you will be liable for short term capital gains tax at your respective tax slab.
    • Short term capital gain is calculated as the difference between the sale value and the cost of purchase (no indexation benefit is available).
    • It will be subject to a TDS of 30 per cent irrespective of your tax slab.

Why invest in Indian Real Estate

China and India are sitting comfortably on top of the list of 20 nations globally chosen on the basis of their growth potential in the retail real estate sector, as per the new research report titled ‘Redefining Retail Investment’ 2012 by the leading international investment and services firm, Jones Lang LaSalle.

It is also evident from the robust recovery of the industry during the latest recessionary period compared to other realty and investment markets worldwide.

This was despite some of the adverse economic regulations such as heavy interest-rates and liquidity-crunch in the market. Now, as the government has displayed strong will to provide the required boost to the real estate market through policy reforms, the trend is only expected to improve from here. Hence we concur it is a good time to invest.

In Finlace’s view, Indian Real Estate market offers good investment opportunity if the investor has a reasonable holding power. While the market is always susceptible to short-term fluctuations based on market sentiments, the long-term outlook holds definite signs of growth fuelled by significant factors such as the Indian economic growth and consistent rise of its middle-class.

NRI’s Investing in India

There are no restrictions for an NRI (Non-Resident Indian) on investing in the Indian real estate market. The federal government has considerably eased entry norms for NRI investment in real estate.

Permission for purchase of Residential property / Commercial property

Type of Investments for an NRI in Indian Real Estate

Assured Return

ASSURED RETURN is a financial scheme offered by developers against property offered. Under such schemes, an investor signs an agreement with a developer and is assured of a monthly return till the time of possession, at an agreed rate of interest. In case the developer enters into a tie-up with the owner or investor for a few more years after the date of possession, the developer finds a tenant on a rent sharing agreement.

The developers offer interest of anywhere between 10-12 per cent per annum and pay through post-dated cheques till possession.

NRI F.A.Qs

  1. Who is an NRI?
  2. As per FEMA 1999, NRI is an Indian citizen who is resident outside India for purpose of employment or carrying on business or vocation in circumstances as would indicate an intention to stay outside India for an indefinite period. An Indian Citizen will also be considered NRI if his/her stay in India is less than 182 days during the preceding financial year.

  3. Who is a PIO?
  4. A non-citizen of India is deemed as Person of Indian Origin (PIO) if he is not a citizen of Pakistan or Bangladesh and if he at any time held an Indian Passport, or he or any of his parents or any of his grandparents was a citizen of India.

  5. Can an NRI / PIO invest in immovable property in India?
  6. Under the general permission available, NRI and PIO can purchase residential and commercial property in India. No special permission is required and no document is required to be filed with RBI for this. This general permission, however, does not apply to purchase of agricultural land, plantation property or farm house in India.

  7. Is there any limitation to the number of residential or commercial properties that can be held by an NRI or PIO in India?
  8. No, there is no restriction on the number of residential or commercial properties that can be purchased.

  9. Can an NRI / PIO sell his immovable property in India?
  10. An NRI can sell his residential/commercial property in India to:

    1. an India resident
    2. an NRI, or
    3. a PIO

    A PIO can sell his residential/commercial property in India to:

    1. an India resident
    2. an NRI, or
    3. a PIO (with prior approval of the RBI)

    An NRI / PIO can sell his agricultural land / plantation property / farm house in India to an Indian citizen residing in India.

  11. Can an NRI / PIO gift his property?
  12. An NRI / PIO can gift his residential/commercial property to:

    1. an India resident
    2. an NRI, or
    3. a PIO

    An NRI / PIO can gift his agricultural land / plantation property / farm house in India to an Indian citizen residing in India

  13. Can an NRI / PIO mortgage his property in India?
  14. An NRI / PIO can mortgage his residential/commercial property to:

    1. An Authorized Dealer or the Housing Finance Institution in India, without the need of any approval from RBI.
    2. A Bank abroad, with prior approval from RBI.
  15. Can an NRI / PIO take back the money earned by selling his property in India to his country of residence?
  16. An NRI / PIO may repatriate proceeds from sale of immovable property other than agricultural land / farm house / plantation property in India provided the repatriated amount does not exceed,

    1. The amount paid in foreign exchange received through normal banking channels,
    2. The amount paid out of his Foreign Currency Non-Resident (FCNR) account, or .
    3. The foreign currency equivalent (as on the date of payment) of the amount paid from his Non-Resident External (NRE) account.

    In case the property is acquired out of Rupee resources and/or the loan is repaid by close relatives in India, the amount can be credited to the NRO account of the NRI / PIO. The amount of capital gains, if any, arising out of sale of the property can also be credited to the NRO account. RBI allows repatriation of up to USD 1 million per financial year out of the balance in the NRO account.

  17. If an NRI / PIO purchased a residential property through loan from an authorized financial institution, can he repatriate sales proceeds from such a property?
  18. Yes, he can repatriate the amount not exceeding the loan amount repaid by him out of the foreign inward remittances received through normal banking channel or by debit to his NRE/FCNR accounts. The balance amount, if any, can be credited to his NRO account. RBI allows repatriation of up to USD 1 million per financial year out of the balance in the NRO account.

  19. Can an NRI / PIO rent out his residential/commercial property?
  20. Yes, NRI / PIO can rent out the property without the approval of the RBI. The rent received can be credited to NRO/NRE account or remitted abroad.

  21. Can an NRI / PIO apply for a home loan in India?
  22. Yes, an NRI / PIO may be granted loan by an Indian Bank / Housing Finance Institute for purchase of residential property in India, subject to following conditions:

    1. The quantum of loans, margin money and the period of repayment shall be at par with those applicable to housing finance provided to a person resident in India.
    2. The loan amount shall not be credited to Non-resident External (NRE) / Foreign Currency Non-resident (FCNR)/Non-resident Non-repatriable (NRNR) account of the borrower.
    3. The loan shall be fully secured by equitable mortgage of the property proposed to be acquired, and if necessary, also by lien on the borrower's other assets in India.
    4. The rate of interest on the loan shall conform to the directives issued by the Reserve Bank or, as the case may be, by the National Housing Bank.
  23. How can an NRI / PIO pay bank installments?
  24. The installment of loan, interest and other charges can be paid by the borrower by

    1. Remittances from outside India through normal banking channels,
    2. Out of funds in his Non-resident External (NRE) / Foreign Currency Non-resident(FCNR) / Non-resident Non-repatriable (NRNR) / Non-resident Ordinary (NRO) / Non-resident Special Rupee (NRSR) account in India, or
    3. Out of rental income derived from renting out the property acquired by utilization of the loan.
  25. What documents are required by an NRI / PIO to apply for a home-loan in India?
  26. The criteria and documents required for applying to different banks may differ as per the guidelines of each bank. Below is an indicative list of documents that may be required for home loan.

Salaried

  1. Work Permit
  2. Employment Contract
  3. Latest Salary Slip
  4. Bank Statement for Salary Account
  5. Bank Statement of NRE/NRO account
  6. Address Proof in country of residence
  7. Power of Attorney (if applicable, in respective bank’s format)
  8. Passport and Visa Copy (for NRI)
  9. PIO/OCI card (for PIO/OCI)
  10. Property agreement duly registered or other related docs

Self-employed

  1. Balance sheets and P&L account of the company for last 3 years
  2. Bank account statements for last 6 months
  3. Income tax returns (3 years)
  4. Address Proof
  5. Power of Attorney (if applicable, in respective bank’s format)
  6. Passport and Visa Copy (for NRI)
  7. PIO/OCI card (for PIO/OCI)
  8. Property agreement duly registered or other related docs
Close