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Directions for NRIs for property investment in India

With the rupee falling, real estate has been one lucrative investment decision for non-residential Indians (NRIs). Also, whether the market is hot or not, many NRIs like to have a place back here in India. An NRI or Person of Indian Origin (PIO) can own both residential as well as commercial properties in India with no constraint whatsoever on the number of properties one can buy. However, you cannot purchase any agricultural land, farm house and plantation property. Also, the monetary transaction must be in Indian rupees (INR) and through normal investment channels using an NRI account.

Backing the Procurement:

Lenders will be more than happy to fund your purchase provided you are qualified and the property papers are clean. It will be wise to get the papers checked by a lawyer before proceeding. Also, make sure to screen the title papers of the property, especially if it is inherited or mutually held, and produce a bank release in case it was under mortgage at any point of time. According to RBI norms, a maximum percentage of about 80% of the value of property can be subsidised by a financial institution. Rest has to come from the NRIs personal resources. Since all transactions must happen through the banking channel, repayment has to be done by inward remittances. The money can be directly remitted from NRO/NRE account in India or issue post-dated cheques from your NRE, NRO or Foreign Currency Non Resident (FCNR) account. In case you let out the property, the rent can be used to repay the loan as well. The loan payments can also be cleared off by receiving cheques from a relatives local account.

Passing the PoA:

A PoA can be given to execute any contracts, deeds as well as mortgage, lease or even sell. You need to make sure about the kind of authority you are giving to the person through the PoA. Also, if and when you want to discard the property, it is better to have a PoA to be a resident of India who may be able to act on your behalf. Formalities such as registration, possession, execution of agreement of sale, etc can also be taken care of, by them.

Guidelines on Property Sales by NRIs:

Under the FEMA rules, if you are an NRI, you can sell off any residential or commercial property you have purchased or inherited to anyone you want. If you have any inherited farm house, plantation or agricultural property, you have to search for a resident Indian to buy it. However, you are eligible to gift them to another NRI or the person of Indian origin. There are some specific RBI guidelines on the deportation of sale proceeds which need to be followed.

Tax implications:

A property is also a good tax saving tool for both Indian residents and non-residents. The benefits for a non-residential Indian (NRI) are very similar to that of a resident Indian. An NRI is eligible for all tax benefits related to purchase of property just like a resident Indian is. So, a claim of Rs 1 lakh deduction under 80C can be duly made.

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