How Can an NRI Buy Property in India?
The Non-resident Indians (NRIs) have been known to invest a lot of money in Indian real estate. NRIs can invest in Indian real estate with more ease than ever because laws governing the real estate market have been revamped, making the entire process a lot simpler. According to careful statistics, NRI investors have spent $13.3 billion in India’s property market, an increase from the previous year’s investment worth of $13.1 billion.
Some of the reasons that NRI’s prefer to invest in Indian property include rupee devaluation, reformed administrative structure and new regulatory policies. This article will shed light which properties an NRI can invest in, the checklist before investment, and some key things to note while making a purchase.
Types of Properties to Invest
1. Residential or Commercial Property:
Any residential purchase or investment in Commercial Real Estate can be made by NRIs under the RBI’s (Reserve Bank of India) general exemption. They don’t need to get authorization from the central bank, and they don’t need to notify the RBI of this fact either. NRIs can purchase as many residential or commercial properties as they like under the current general permits in effect.
2. Agricultural or Plantation Property:
As long as a proper Power of Attorney has been granted, any person can be authorized to act on the NRI’s behalf in connection with the transaction. Under the RBI’s general authorization, NRIs are not allowed to acquire agricultural or plantation property in India. As a result, NRIs cannot buy a farmhouse in India under the current restrictions.
NRIs who plan on purchasing a farm or plantation in India will need to get clearance from the RBI on a case-by-case basis if they desire to do so.
Checklist For NRI before Investment in India
1. Home Loans:
It’s a wonderful time to purchase a property with a loan because interest rates on home loans are at a decade-long low, with some banks offering financing at 6.5%. NRIs may be eligible for a bank loan of up to 80% of the property’s value, but the documentation might be time-consuming.
2. Tax Brackets for NRIs:
If an NRI gets money in India, they must pay tax on it. Immovable property that has been kept for more than 24 months is considered a long-term capital asset and is taxed at 20%. An additional tax break for NRIs is provided by the Income-Tax Act, which provides Section 80C-80TTA-based deductions.
3. Payment Transfer Rules:
Alternatively, NRIs can send their funds to an NRO account in India and then pay the vendor straight from that account in their home country.
4. Make Informed Decision:
To make an informed decision about whether to invest in India, an NRI should prepare a checklist of items that includes property verification, a list of all required documents, KYC (Know Your Customer), a payment plan, tax implications, legalities, and other local formalities, as well as someone trustworthy to assist with the process so that it is smooth and efficient.
Key Things to Note when Investing as NRI
When it comes to buying property in India, non-resident Indians have had a huge impact on the market. Investors and those who hope to return to the country after retirement are the two most common reasons for purchasing Indian property.
Following are some key things all NRIs should note when investing in India:
1. Documents Required:
Those wishing to invest in real estate in India need only a few pieces of identification: a passport, proof of address, a permanent account number, and a current photograph.
2. Consultation with Reserve Bank of India:
As established by FEMA, an NRI is permitted to acquire any underlying asset in India apart from agricultural land property or a farmhouse for purchase by an NRI. In general, the Indian government has granted its consent for this to be done in the public domain.
Reserve Bank of India has to be consulted in advance before any foreign nationals can buy or sell real estate in India, except for short-term leases of no more than five years.
3. Where to Obtain Home Loans?
Home loans can be obtained by any NRI, even if they lack the necessary cash. A number of banks and housing finance institutions now registered with the National Housing Bank.
They have been granted approval by the RBI to offer house loans to NRIs interested in purchasing real estate in India on their own. NRIs need to remember that all transactions must be done in Indian currency.
4. Bank Account for Home Loan:
However, an NRI’s bank account cannot be instantly credited with the loan. It may only be deposited directly into the bank accounts of the seller or the developer.
It is possible to pay back the loan with funds from an NRI account, such as an NRO (Non-Residential Ordinary) account or an NRE (Non-Resident External) account.
5. Always Rely on Professional Builders:
When it comes to buying a home or making a commitment, an NRI must cut out all of the middlemen. Instead, go with a reputable builders and Brokers of Real Estate that have a track record of success and trustworthiness and buy the land straight from them.
6. Tax Advantages for NRIs:
Tax advantages are identical to those enjoyed by any Indian citizen. NRIs are entitled to the same tax advantages as Indian citizens. NRIs must pay a 1% withholding tax if they purchase a property worth more than Rs 50 lakh.
7. Exemption from Wealth Tax:
If the property is unoccupied and declared “self-occupied,” it will be free from wealth tax. In order to avoid paying the wealth tax, they will have to rent it out for at least 300 days a year. Only the first property is subject to this rule. For properties that remain empty for longer than 30 days, they will be subject to a 1% tax on the value of the property.
8. Power of Attorney:
As NRIs don’t live in India, there may be times when they are unable to purchase the property in person, but POA (Power of Attorney) comes to the rescue.
What this implies is that an NRI can delegate the completion of your transaction to a person who is close to them and who can do it on your behalf lawfully.
Reserve Bank of India has granted broad authorization to NRIs to acquire various types of real estate in India. They can buy commercial or residential property in India. Our company has been helping NRIs to make purchases in Indian real estate. If you are NRI and seeking an investment opportunity for either self-use or commercial properties, we are here to help you right away!