5 Commandments for NRIs looking to invest in Indian real estate

It’s a golden time to invest in Indian real estate. The industry is on an uptick, regulatory actions have reformed the landscape, rupee is at an all time low, and great deals by reliable developers are flooding the market! It’s made real estate a hot bed for global investors to jump into the league of buyers.

If you are an NRI looking to invest in Indian realty, here are a few things to keep in mind:

Bestow some super “powers”!

If you are a NRI, who cannot be physically present in India for processing and registering the property transaction procedures, Power of Attorney (PoA) is mandatory.It enables another individual to act on behalf of the actual investor. This lawful transfer of responsibility will help with the effortless management of all necessities without much personal intervention from you.

The Power of Attorney is a critical document that will come in handy during activities such as mortgage, lease, sale, collection of rent and borrowing, manage disputes, perform acts mandated by banks, and entering into contracts.

You are eligible for benefits!

India maintains double taxation avoidance agreements with more than 90 countries. An NRI can declare tax credit on taxes paid by him in India on income from immovable property in the country he stays in. An NRI owns the liability to pay tax on the amount of capital profits arising in Indian business.

If held for more than 24 months, an immovable property will be considered as a long-term capital asset and is eligible to receive the indexation benefit with taxation at 20%. According to Section 80C to 80TTA, the Income-Tax Act also permits specific tax deductions that NRIs cause to bring down their tax burden.

Have you clicked all the right buttons?

With RERA, GST in real estate, and government’s initiatives to boost the sector, investing in Indian real estate has become much simpler. Most of the road blocks have cleared and the business is much more transparent and structured, thanks to the legal backing.

Therefore, it’s much easier and convenient to create a checklist of activities in sequence- property verification process, list of important documents, KYC, payment plan, tax implication rules, local formalities in each state and so on. If you move on each step in sequence with the right person to support you locally, you can sail through this process easily.

The rupee, realty, and the NRI

The Foreign Exchange Management Act (FEMA) governs the real estate transactions in India for NRIs. The Reserve Bank of India has decluttered the rules, for example -the NRIs holding an Indian passport don’t require an approval while investing in Indian real estate. However general permission category individuals might need to secure approvals, if they are citizens of neighbouring countries (Pakistan,Bangladesh, Sri Lanka, Afghanistan, China, Iran, Nepal or Bhutan).

The payment by NRIs can be made through inward remittance, non-resident rupee (NRE)accounts, non-resident ordinary rupee (NRO) accounts or foreign currency non-resident (FCNR) deposit accounts. If the property investments comprise stamp duty, registration charges and service tax, the payment has to be made in accordance with the Indian laws.

Type of property to invest

Even though NRIs can buy any number of properties – they are not allowed to purchase any form of agricultural land, farmhouse, or plantation area unless it has been gifted to them or if they have lawfully inherited by them.

Recently released ANAROCK’s survey revealed that real estate continues to be the favourite investment option in India for most non-resident Indians (NRIs). 78 per cent respondents preferred real estate over other asset classes for investments, pushing stocks, FD’s, mutual funds to the backseat. The falling rupee value and new regulatory reforms are encouraging more global investors to pick India.

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