NRI Investors : Demystifying RERA, GST & REITs

Tips for NRI investors wanting to buy property in India

For a long time, the real estate market has been one of the most attractive options for investment in India for NRI’s (Non-Resident Indians). And it was one of the fastest growing sectors in India. However, with GST coming into play and the new real estate rules bring put into effect it has been an uncertain time. The changes have been gradual, but the real estate sector is gradually waking up to the benefits. So, what do these changes imply if you are a NRI looking to invest in real estate in India?

RERA: what it aims to do

One of the main concerns of the NRIs investing in India was the opaque nature of the business and the lack of useful information. There was no standardization, no legal recourse for the buyer. It used to be very cumbersome, especially for the NRIs to do timely follow-ups with the developers. The RERA or the Real Estate Regulation Act addresses these issues.

RERA aims to ensure that the interest of the purchaser will be protected and there will be a greater level of transparency in the sector. It will put the accountability on developers in terms of financial disclosure, timely development of projects and maintaining good corporate governance practices. The fact that most of this data will be available online itself will boost the confidence of NRIs planning to invest in the property.

GST: what it aims to do

The GST aims at doing away with the difference in indirect taxes applicable across the states. The real estate sector stands to benefit from GST because it allows for tax credits for re-transactions and in the long run reduce the price of the property.

The way ahead

The introduction of Real Estate Investment Trusts (REITs) will also have a huge impact on the sector. REITs are investment vehicles that own, operate and manage a portfolio of income-generating properties for regular returns. In simple terms, it works mostly like a mutual fund. It pools funds from a number of investors and invests them in rent-generating properties.

SEBI has said that Indian REIT’s have to be listed on exchanges and to make an initial public offer to raise money. REITs will have a three-tier structure and will have a minimum of 2 Lakh rupees investment requirement. You can invest in REITs in the primary and secondary market and exit any time you want.

NRI Investing in India

In short, RERA will provide more transparency, GST will consolidate the tax structure, and the Benami Transactions (Prohibition) Act provides an effective regime for the prohibition of benami transactions making it an ideal time to invest in real estate.

Links for ref:

With RERA kicking in, NRI interest in Indian realty set to rise

What is the Impact of RERA on NRIs investing in India property market

All you wanted to know about…REIT