NRI Investment In Indian Real Estate: Things You Should Know! Real Estate Investment

NRI Investment In Indian Real Estate: Things You Should Know!

  • Media Icon 28 February 2020

Real estate Investment in India is an attractive proposition for NRIs (Non Resident Indians), now more than ever as the government has implemented RERA and the Benami Property Act, bringing in more transparency and customer confidence in real estate dealings. NRI investment in real estate is surging as it gives the benefits of high returns on low initial capital investment. But before making any property investment in India, NRIs need to be aware of the rules and regulations to avoid any problems (or legal hassles) in the future.

Type of property NRIs can invest in
NRIs are eligible to invest in residential or commercial properties but cannot purchase any agricultural land as such. But they can inherit or receive agricultural properties as gifts. There is no limit on the number of properties that an NRI can purchase but the taxation is calculated depending on the usage of the property.

Documents required for purchase
The NRI buyer must get a PAN (Permanent Account Number) card as it is necessary as an ID proof for all monetary transactions related to property purchase. In addition, passport, address proof, and a recent photograph are the other documents that are needed.

FEMA regulations
To boost NRI investment in India in the real estate sector, the RBI (Reserve Bank of India) has simplified the rules. All NRI real estate transactions come under the purview of the Foreign Exchange Management Act (FEMA) which states that an NRI or Person of Indian origin (PIO), can purchase any immovable property in India, other than agricultural land/plantation property/farm house.

Power Of Attorney (POA)
As NRIs don’t physically reside in the country, appointing a legally valid POA is necessary to complete transactions on their behalf and also to protect against any fraud. The POA must be signed in the presence of 2 witnesses who need to be physically present in the Indian Embassy. The document must be attested by the Indian Embassy and the registration has to be completed within three months from the date of execution. The registered POA can be used for mortgage, leasing or renting out, managing disputes, and entering into contracts on behalf of the NRI.

Repatriation of funds
As long as the property has been purchased in accordance with FEMA guidelines, the NRI can repatriate the proceeds from the sale of property in India. But the amount to be repatriated cannot exceed the principal amount that was invested in India. Also, repatriation of funds is restricted up to a maximum of two residential properties.

Taxation rules
NRIs can claim tax benefits similar to any Indian citizen such as a deduction of Rs.1 Lakh under section 80 C on the Income Tax Act, 1961 on the purchase of a property. But NRIs have to pay a withholding TDS at the rate of 1% if they decide on buying a property worth more than Rs 50 lakh. No tax is levied in case the property is purchased for self-use but if the property is rented out, the rental income earned from the property is taxable, irrespective of the residential status. In case an NRI owns more than one property then only one will be considered for self-use, and the others shall be deemed to be rented.

Home Loans
NRIs can apply for home loans from banks and housing finance institutions that are currently registered with the National Housing bank to buy residential property in India. But all transactions have to be made in Indian currency only. Also, the loan cannot be directly credited to the NRI’s account, rules state that the loan amount can only be disbursed to either the seller’s or the developer’s bank account directly. Loan repayment, however, can be done using funds in an NRI’s NRO (Non-Residential Ordinary) /NRE (Non-Resident External) account or FCNR (Fixed Deposit Foreign Currency account) deposits.

Real estate investment is beneficial to NRIs but they need to conduct due diligence before investing. One of the most attractive options for NRIs looking to purchase properties in India is Mahindra Lifespaces. Offering quality residential real estate with multiple projects in Mumbai, Bangalore, Chennai, Nagpur, Pune and Gurgaon in the affordable as well as mid-premium segment, Mahindra Lifespaces projects are already home to thousands of Indian families. Practicing highest ethical standards and transparency in corporate dealings, Mahindra Lifespaces are committed to providing sustainable housing combined with integrated living through businesses, infrastructure, social and residential facilities.

One such destination and development that proves ideal for NRI investments is Mahindra Windchimes by Mahindra Lifespaces in Bengaluru. Located on the happening Bannerghatta Road, the project has 3 & 4 BHK homes from ₹ 1.70 Cr* onwards. These homes have been developed to perfectly co-exist with their natural surroundings and therefore offer a tranquil lifestyle unlike others.