NRI Investments in Indian Real Estate-Your Complete Checklist To Invest Right!
Many Non-residential Indians (NRIs) are prompted by the attractive offers that real estate in India has to offer, to either return to India or invest in immovable property in India as a secure investment option . There are many other factors that have recently influenced a huge surge of NRI investments in the Indian real estate market such as the low currency rate, attractive discounts and the slowdown in the market. Owing to these lucrative factors, the current market scenario seems suitable and even profitable for NRIs to invest in. However, it can seem like a very challenging and daunting task to invest in your home country while residing in a different country. Also to mention, there are different sets of rules for Indian citizens and NRIs hoping to invest in commercial real estate (CRE) in India.
Also Read: Commercial Real Estate Trends and Insights
Here, we have compiled a comprehensive checklist of certain aspects that must be kept in mind as an NRI looking to invest in India to help you get the most out of your investments.
Concerns of NRI regarding Investing in India
- Finding the proper builders they can rely on in terms of project quality and delivery.
- Projects that have not been finished on schedule.
- Investing, paper work, and authorizations are all a bit hazy.
- Property upkeep on a regular basis.
- Leasing and re-leasing are two different things.
- The state of the property after the occupants have left.
- Investing mistakes/dead money
- While it is true that some builders have defrauded consumers, it is also true that there are other builders in India that follow the law to the letter and are completely honest in their dealings.
- There is a simple approach for NRIs to verify that their investments in India are protected. They only need to do a few checks.
A Quick Checklist to Help You Navigate Through Your Real Estate Investment Journey in India
Verify and Assess Builder Reputation
NRIs can often find it challenging to survey and select suitable properties and inspect them in person. Therefore to ensure safe and systematic real estate investments, make sure you operate according to the norms mentioned under RERA (Real Estate Regulations Act). Under the Real Estate (Regulation and Development) Act, 2016, every under-construction housing project in India must be certified (RERA), which protects buyers’ interests by establishing a comprehensive grievance redressal mechanism. It ensures that projects finish efficiently as builders will be held accountable for delays, misleading advertising, and poor construction efficiency, among other items, if funds from an announced project are diverted.
NRIs can perform a mandatory backcheck on the builder by looking at the real estate company’s social media pages and other online forums. You must stick with well-known developers who have a track record of completing projects over time. NRI buyers, in particular, must be aware of how to protect themselves from dishonest real estate developers and brokers.
Be Clear on Your Funding Sources
As an NRI looking to purchase real estate in India, it is required that you consider opening NRO (Non-residential ordinary)/NRE (Non-residential external) accounts as a prerequisite. Almost all your financial transactions such as repayment of loans, buying or selling would be exercised through either an NRO or NRE account as per the legal requirements from RBI. As for NRIs who do not have their funds sorted immediately, the RBI has now granted permission to banks and other financial institutions registered with National Housing Banks to provide loans to NRIs looking to buy residential homes in India.
Consult a Real Estate Advisor
After considering the above factors, as a next step, consult a real estate advisor who can analyze your requirements and recommend the most suitable investment choices. Since it can be difficult to monitor your properties from your residence abroad remotely, it’s a smart idea to employ a reliable and competent property manager to handle all of the property-related issues, collect rental payments and run necessary errands.
Be Smart About Your Taxes
When it comes to tax advantages, they are identical to those enjoyed by any Indian person. NRIs are eligible for the same tax benefits as Indian citizens. The gains or capital gains are the primary source of taxation for an NRI selling a property in India. Whether the capital gains are short-term or long-term, these taxes are levied at a different rate.
Furthermore, if you purchase a property worth more than Rs 50 lakh, you must pay a 1% withholding TDS. You can save money on taxes by taking advantage of tax incentives. These tax breaks function as deductions that can only be claimed on long-term property transactions. NRIs will also benefit from tax cuts on long-term capital gains. The exemption can be asserted under sections 54, 54 F, and 54 EC, unlike short-term capital gains.
Set Reasonable Return on Investment (ROI) Goals
NRIs investing in residential real estate should expect a reasonable return over a long period, keeping in mind that exchange rates would also affect their returns. Furthermore, various external costs are associated with maintaining the properties owned that would also affect the net return on investment. Studies also show that real estate returns are likely lower than they have been in the recent past. Therefore, it is important to set reasonable returns on investment goals.
Consider applying for a Power of Attorney (PoA)
Since NRIs do not live in India, there may be times when the said person cannot physically purchase the property; however, POA is available to help. This means that an NRI can choose someone close to them, such as a parent, acquaintance, or even a colleague, to complete the transaction on their behalf (legally); this will help them avoid miscommunications and fraud.
To ensure that the property’s price and dedication are pure and original, you must cut out the middlemen; therefore, it is suitable to opt for a PoA instead.
The real estate market is an attractive arena for a safe and secure investment that guarantees great pay-backs, especially amongst the NRIs. However, while making important investment decisions such as these, it is prudent that you follow certain strategies that would ensure that you get the best out of your investments, avoid falling prey to any fraudulent activities and safeguard your assets from the comfort of your residence abroad.
Assetmonk provides investors with a high-quality investment portal where they can find high-yielding real estate properties to invest in. The online investing website serves as a portal for NRI real estate investments. It streamlines real estate investment procedures by offering high-quality real estate asset options across the country at affordable rates. This saves NRIs time from the otherwise time-consuming investment process and fruitless quest for a property in India.
Checklist for NRIs Looking to Invest in Indian Real Estate FAQ's:
An Aadhar card is not required for an NRI/PIO to purchase or sell property in India, according to rule 114C. However, they must submit the following documents for verification purposes:
- PAN card
- Copy of relevant passport
- Copy of relevant Visa
- Identity Proof
- Residential Proof
- PIO (Person of Indian Origin) card
When an NRI sells land, the buyer must deduct TDS at a rate of 20%. A TDS of 30% will be applied if the property is sold within two years of purchase (reduced from the date of purchase).
NRIs can purchase both residential and commercial property. However, an NRI cannot purchase agricultural land or plantations. The Reserve Bank of India (RBI) will review such interest on a case-by-case basis if there is a justification for scouting agricultural property.
In order to make a safe investment back home, it is prudent that you follow the guidelines laid out by the Foreign Exchange Management Act (FEMA). The RBI has introduced it to make the process of investment for NRIs less cumbersome and safe. Moreover, while surveying for properties, make sure you opt for the ones that are certified under the RERA Act. Seek professional help to help you curate the most suitable real estate investment options for you.
NRIs must first consider opening an NRO/NRE account as a prerequisite before considering India’s buying property. This is because almost all the financial transactions would be essentially carried out through the NRO/NRE accounts or FCNR deposits. As for home loans, the RBI has now granted permission to banks and other financial institutions registered with National Housing Banks to provide loans to NRIs looking to buy residential homes in India. Moreover, you can get in touch with professionals through online platforms like Assetmonk to consult about the properties and other lucrative offers.