Real estate is one of the preferred asset class for investors and is popular among NRIs. Do you know as an NRI what type of property you are eligible to buy in India? What are mandatory documents for acquiring property in India or getting home loan in India? Before you know the process of NRI buying a property, you must know what differentiate an Indian and NRI investment in India.
Who is an NRI?
In simple words, a Non-resident Indian (NRI) is a person resident outside India but an Indian. The Income Tax Act and RBI classify residential status of a person into ‘Resident’ and ‘Non-Resident’. Resident further divided as Resident and Ordinarily Resident (ROR) and a Resident but Not Ordinarily Resident (RNOR). Non-resident is further classified into Non-resident Indian (NRI), Person of Indian origin (PIO) and Overseas Citizenship of India (OCI) commonly known as ‘Dual Citizenship’ but not a dual citizenship.
To determine whether a person is ‘Resident’ or ‘Non-Resident’ he/she has to satisfy condition or definitions under the RBI or Foreign Exchange Management Act, 1999 – [FEMA] or the condition or defined under the Income Tax Act,1961.
The status of a person as a resident or non-resident depends on his period of stay in India. An individual who is an Indian Citizen and not satisfying any of the basic conditions for ROR or RNOR will be a non-resident generally termed NRI.
How an NRI can acquire immovable property in India?
Non-resident Indians (NRI) can acquire immovable properties in India and there are no restrictions while investing in commercial or residential properties. Other than agricultural land, plantation property and a farmhouse, NRI can acquire any immovable properties in India. NRI can buy plots of land, prelaunch properties, under-construction properties or ready for possession properties.
NRI cannot acquire agricultural land but can acquire the same by inheritance or eligible to possess, if acquired before acquiring NRI status. An NRI can receive immovable property as a gift from Resident of India, NRI or POI. But NRI is not eligible to receive an agricultural land as a gift.
*Documents required for buying property
- Pan card (Permanent account number)
- OCI/PIO card (In case of OCI/PIO)
- Passport (In case of NRI)
- Passport size photographs
- Address proof
- Notarized power of attorney to someone in India
NRI Home Loan
Like resident of India, NRI too can apply for Home Loan in India. The reputed banks offer NRI home loans for acquiring new or resale flats, construction on owned plots, buying of plots or alteration to existing property etc. The NRI who meets the terms and condition of RBI can get loans from his/her employer in India. Inward remittances, debit to an NRE/FCNR/NRO account, Rental income or other income from India are eligible for loan repayment.Copies of the passport, valid visa and work permit, contract of employment, work experience certificate, salary certificate and statements of NRE/NRO accounts are some basic document required for the Home Loan in India. NRI is eligible to get the Home loan of up to 80 per cent of the property price.
Tips for NRI investment in India
Indian rupee’s depreciation, deregulation of interest rates for NRE accounts in India, attractive investment option, key builders offering property expo in abroad etc are attracting NRI to invest in India. According to the source, there is an increase in NRI investing in real estate in India in last one year. If you are an NRI and looking to earn good returns from real estate or buy a property as an investment, here are some useful tips for your investment.
- Clear title properties: The title of the property plays vital role in buying and selling a property in India. Ensuring the property you are buying has clear title states that the property you are investing are free from debts and undisputed title or ownership.
- Mode of payment: The mode of payment for purchase of residential or commercial property in India can be made from normal banking channels, funds held in NRE / FCNR (B) / NRO account or home loans received from financial institutes in India.
- Taxation in India: NRIs are taxable on income accrued or received in India. The mere acquisition of property does not attract income tax. However, any income accruing from the ownership of it is taxable. In such case, if you already have a home in abroad and investing on residential property in India, the second home, whether you rent it out or not, will be deemed to be given on rent. You will have to calculate deemed rental income and pay the income tax for the same in India. Even for second home obtained by inheritance or gift in India will be eligible for Income tax in India.
- The Repatriation of sale proceeds: There is no restriction for the number of properties an NRI can acquire but there are restrictions on the repatriation of sale proceeds that is two units.
- Power of Attorney (POA): You can execute a POA to representatives in India to act on your behalf. If the representative in India is your family member, you can easily get home loan and the process of buying property in India can be simplified. The POA needs to be attested by notary from Notary public or getting attested from Indian embassy paying proper stamp duty. Know the difference between General Power of Attorney and a special Power of Attorney. To prevent property fraud and other misuse of your POA, you can execute a Special Power of Attorney. In Special POA, mention clearly acts you do not want your representatives to do other than what specified therein.
- Real estate trend: Before you invest in real estate, do your homework to know the trend in Indian real estate and top cities for your investment. Location, connectivity, neighborhood, property size, budget and extra charges like Stamp duty, Service Tax, legal expert charge, maintenance charge, EDC, clubhouse etc are some basic things to consider before you invest in property in India.
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