India has one of the strongest realty industries in the world. During the last global recession, one of the only country to have not shown any signs of crashing or drastic slow down. NRIs or non-resident Indians, are aware of this fact and prefer investing their stronger foreign currency savings into the booming Indian real estate industry. NRIs world-over would also like to own an apartment or home in India for a sense of nostalgia and connect as well. Aside from the NRIs, there is one more category of people who can invest in real estate in India; these include the PIOs (Persons of Indian Origin) / OCIs (Overseas Citizens of India).
Though investing in India might appear a bit perplexing initially, after a little bit of Google search and asking around, it becomes clear that the Indian laws & regulations are quite lenient and allows NRIs to buy residential or commercial properties in India without prior permission. There are some guidelines for NRIs that should be kept in mind:
- They are not allowed to buy more than two residential properties in India.
- They can either come down to India and invest directly, or they can give power of attorney (POA) to someone to complete the transactions.
- They are not allowed to invest in farm houses, agricultural land or plantations. Although they can own these categories of properties, provided they are inherited or gifted to them.
- They are also eligible for taking home loans for buying residential plots, building homes or buying a ready-made one. The rules for applying for a home loan are similar as those for resident Indians, with one exception – income and educational qualifications matter when it comes to the amount of home loan applied for by an NRI.
- Documents required include copies of passport, work permit, valid visa, salary certificate, permanent account number (PAN card), etc. There is a need for a local contact address as well as power of attorney to a reliable person, preferably your chartered accountant.
- Banks allow 80-85% of loan amount against the property value and allow shorter payback periods of 5-15 years to NRIs as compared to about 30 years to resident Indians; this is because they are expected to have higher repayment potentials than resident Indians. But when it comes to loan interest rates, NRIs can avail of the same rates as the resident Indians. And in the case of loan default, do remember that the loan is taken against the said property itself, thus making it the bank’s property upon non-repayment of the loan.
- The tax rules applicable for NRIs are pretty straight forward too, with no tax being applicable for holding properties in India. However, if rent is being sourced from these properties, then it will be taxable.
- If any property is sold by any NRI, then tax will be imposed on the capital gains incurred. They should try and hold onto the property for at least three years to avoid having to pay short-term capital gain tax.
- Property management is crucial. And it’s always wise to have a reliable person on the ground to consider the property’s well-being against fraudulent builders, tenants or encroachments.
It’s said that being forewarned is being forearmed, and the above details should help you invest wisely into a property that you cannot foresee over personally, so choose wisely!