The first question in the minds of any potential property investor is mostly regarding the safety of such an investment.
The answer, though not difficult, does involve an analysis of the economy and exercise of due diligence in the area of investment. The relief factor, however, is that there are competent Professionals and Law firms who assist and guide the investor to decide prudently.
Investment in Indian Property is a lucrative option. It is supported by investor-friendly policies of RBI and the guidelines of FEMA. The introduction of RERA (Real Estate Regulatory Authority) has driven the NRIs to invest in India. There is a rise in accountability, which has helped to gain their confidence.
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Investment decisions are broadly based on profitability and governmental policies.
For NRIs, there is another significant factor that motivates them to invest in India. It is the opportunity to stay connected with the roots and the native place.
NRIs must remember:
NRIs can invest in any commercial or residential Indian Property, except agriculture land, plantation, and farmhouses.
NRIs can purchase more than one residential or commercial property without any permission from RBI or Government. There is no need to inform the RBI about such a transaction.
Read More: NRIs Alert! Buying property in India? The guidelines
For Investment in Indian Property, NRIs must know:
- Conformity to rules: NRIs must comply with the guidelines of RBI and FEMA for investment.
- Loan Availability:
RBI has issued general permission to all banks to provide loan facilities to the NRIs for the purchase of Property in India. NRIs have to meet the eligibility criteria and must possess the requisite documents, like valid passport, PAN Card, Photographs and other prescribed documents.
- Mode of payment: All payments have to be made in Indian Currency. NRIs who buy the Indian property can make the payment,
- By remitting through proper banking channels from abroad.
- By making use of funds in the NRE/NRO/FCNR accounts. Even, the housing loan that has been availed is repaid using funds from these accounts.
Taxation Policy:
- Income from investment in the property is either in the form of rental income or capital gains. This income is taxable.
- Under DTAA (Double Taxation Avoidance Agreements), an NRI can claim the tax credit in his country of residence, for taxes paid in India.
- Tax benefits on purchase of the Property in India are the same for both NRIs and resident Indians. Deduction of Rs 1.50 lac u/s 80C of the Income Tax Act as available to a resident is also available to an NRI.
- The income tax (TDS) rate is 1% of the value of the property if the value of the property bought is more than Rs 50 lac. The rate is higher if the seller of the property is also NRI.
- If NRI avails home loan to buy a property, the interest paid on loan is deductible from the taxable income.
- In case NRI sells the Property, TDS is deducted at the rate of 20% on short term capital gains and 30% on the long term capital gains.
Repatriation of sale proceeds:
The limit for repatriation of sale proceeds is US Dollars One million per financial year. The sale amount is deposited in NRO account and repatriated after payment of tax. For repatriation, the proper procedure of the bank is followed. If the amount exceeds the limit, the permission of RBI is required.
Read More: FEMA – How it defines citizens
There are many factors existing today in India to lure the NRIs to invest in Indian property – all that one needs is due diligence and proper analysis.