Points NRIs must consider before Buying a Property

21 Sep 2017

Investment in property is a great way of multiplying your assets with many a millionaire having made his bucks in the real estate market. And with the current boom in this industry along with the favorable currency exchange rates, Non-resident Indians (NRIs) stand to benefit a great deal by investing in property in India too.

With the newer real estate rules and regulations, buying properties has become easier and NRIs are pretty excited about investing in this cash cow! However, before investing in India, NRIs need to have a clear understanding of the rules and regulations and here are a few pointers that NRIs need to take into cognizance:

  • As long as an NRI holds an Indian passport, they have similar rights to resident Indians according to FEMA (Foreign Exchange Management Act) and can invest in residential or commercial property – with an exception being agricultural lands and farm as well as farmhouses. Such ownerships are only allowed if they are inherited or gifted to the NRI in question.
  • Secondly, an NRI can own as many immovable properties as he can purchase, without needing any government permission as long as they are bought in Indian currency, through funds transferred via regular banking channels.
  • As NRIs live outside the country, they need to give power of attorney to some locally based Indian residents to oversee the well-being of the property and any issues that might possibly arise.
  • NRI investors are treated at par with Indian investors and are eligible for home loan schemes too; several NRI special schemes are available where the investor needs to put in a minimum of 20% of the cost value while the bank provides the remaining 80% funding. Payment of EMIs can be done through NRO/NRE accounts or through FCNR deposits in Indian currency.
  • However, before shopping for a home loan, get an experienced lawyer to go through all the paperwork involved in the property purchase to ensure that there is no fraudulence or encumbrances involved. Make sure that your property seller is clear and aboveboard in his dealings; go for big brand names as they have more at stake.
  • If you are planning on giving out the property for rent, the income is taxable, just like for resident Indians but you can claim tax benefits of up to 1 lakh. Be advised not to sell the property within 3 years as its considered short-term capital gains that’s taxable. Sell after 3 years and you can even reduce your long-term capital gains tax by investing the profits into another property.

Hiring the services of a good lawyer would work well for the NRI as they are more up-to-date on all rules and regulations, helping you stay invested safely and profitably!