NRI guide for real estate investment in India
The real estate market in India is
growing fast and it has become a lucrative sector of investment over the years.
The market has surpassed the mark of $150 billion by the end the year 2018 and
it is expected to touch $1 trillion within the next decade.
These statistics are encouraging
for real estate investment in India at the first place. But, the Indian
government has passed the Benami Bill and Real Estate Regulatory Act recently,
which have made this very market in India look more attractive. These acts have
made investment in the sector for the foreign Indians and the Non Resident
Indians (NRI) pretty much easy and profitable.
Now that, these acts have made it
easier for the NRIs to invest, let’s have a look at some essential things to
remember for them. Usually the NRIs buy land in India for investment purpose.
With issues like project delay, land crisis, price hike, NRIs sometimes find it
difficult to approach. Still, the acts mentioned above have made the situation
With a permanent account number, any non-resident Indian can invest in property sector. But, that’s not everything. Before pouring money in properties, one needs to keep in mind some specific things mentioned below.
No matter whichever sector you are
going to invest your money in, you must conduct research on that field and
bring some important findings to evaluate the future. As an NRI, one might not
be familiar with the Indian market and other factors. So, one needs to go for
some specific findings which would help him to understand the situation.
First of all, it is necessary to find out property trading history of the area. An easy way to do this can be going to the banks and local property management organizations. Also, the overall infrastructural condition of the area has to be assessed. An area with good infrastructural condition is highly likely to shine in real estate market. Transportation is the first condition in this case. If an area doesn’t have good transportation system, no matter how good the infrastructure is, the area won’t be doing well in the market.
The last finding one need to
collect is legal issues. If an area has too much legal issues and disputes, it
is better not to invest there.
NRIs often face a common issue while
investing in property in India. The issue is buying lands that are not supposed
to be sold to them. For instance, a NRI can’t buy a farmhouse, agricultural
land or a plantation land. Buying these types of lands might cause legal
All the real estate terms and
rules are governed by the Foreign Exchange Management Act or FEMA. So, it is
better to learn the rules first. One can also determine the state of the land
whether it is for residential purpose or investment. In this case, FEMA can be
of great assist for one.
Avoiding extra charge
NRIs often take assistance from local brokers and bear heavy additional charge. Proper financial planning could save this additional expenditure. As all the transactions are done with Indian rupee, there are many brokerage firms and assistance available for currency exchange in property trade.
But, those might prove very
expensive. Better option is opening a NRE account with an authorized Indian
bank, through which all the currency exchange trade can be completed. With NRE
account, one can utilize the money directly coming from abroad to India without
any tax. Besides, one can raise fund up to 80% of the total amount needed for
investment through requisite funds.
Power of attorney
If you are not residing in India and want to buy a property there while you can’t be present physically, you can bring in a Power of Attorney or POA. Once you’ve brought a POA, the POA will be legally responsible for taking all the necessary actions regarded to your property.
As the Income Tax act 1961 is
active, a NRI can claim up to 1 lakh rupee tax deduction. This act is a great
opportunity for the NRIs to gain some tax benefits. If they sell their property
after 3 or more years, the transaction will be considered as long-term capital
gain and the owner will be able to claim tax reduction on that. So, it is wiser
to invest in long-term basis for the NRIs.