NSDL or National Securities Depository Limited is a financial institution that was established to keep securities like shares, bonds, etc in the shape of non-physical or physical certifications, that is in demat format. The securities are maintained in deposit accounts, which are similar to funds in bank accounts. It allows for quick securities transfer because ownership gets transferred merely by ledger entries. This is frequently done digitally, saving the extra time required in the previous practice of exchanging physical certificates once a deal was concluded. India’s capital market, which has been around for almost a century, has always been quite active. But, due to settlements that are based on paper, it had significant flaws such as poor delivery, prolonged transference execution, and so on. To address these concerns, the Depositories Act 1996 was enacted and went into effect on Sept 20, 1995. This legislation mandated the Security Depositories establishment in India to manage securities. Security is a financial asset that…
RBI Guidelines For NRI Investments In Real Estate
NRIs can buy and sell real estate in India. NRI investments in India get governed by the Reserve Bank of India and are subject to the Foreign Exchange Management Act (FEMA). As a result, there are investment rules and regulations for NRIs in Indian real estate that must get followed during such transactions.
For NRIs, real estate is one of the most famous investment vehicles. Because of new real-estate market restrictions, anyone with an Indian passport can now invest in Indian real estate, making the process extremely simple. According to a report, NRIs spent US$13.3 billion in the Indian real estate industry in FY 21, an increase from the previous estimate of US$13.1 billion. The depreciation of the rupee, as well as the regulatory environment created by the reforms, has prompted many NRIs to invest in the Indian real estate market.
Can NRIs invest in Indian real estate?
The Reserve Bank of India (RBI) has granted NRIs and PIOs general permission to purchase any residential or commercial property in India. They are not required to seek specific permission from the central bank, nor are they required to send any communication or notification to the RBI in this regard.
An NRI or PIO can purchase an unlimited number of residential or commercial properties under the existing general permissions. The income tax law also allows an NRI/PIO to own an unlimited number of residential or commercial properties. An NRI can buy the property as a sole owner or in partnership with another NRI. However, regardless of the second holder’s contribution to the purchase, a resident Indian or a person who is otherwise not permitted to invest in a property in India cannot become a joint holder in such property.
Read more about The Scope Of NRI Real Estate Investments In India In 2022.
Where can NRIs invest in real estate?
‘Where should I invest in the Indian real estate market?’ is every NRI thought and question. The following are the types of properties available for investment in India, as well as the best locations for the various types of properties and the status of the CRE market in different regions of India:
- Commercial Real Estate: Properties purchased for the sole purpose of professional work are classified as commercial real estate. The CRE industry is divided into four segments: industrial, retail, office, and multifamily. When it comes to investment pooling, this is one of the fastest-growing sectors. Nowadays, as commercialization and urbanization have spread throughout the country, particularly in metropolitan areas, the investment potential of CRE has skyrocketed. NRIs prefer this real estate property for investment as well, where individuals are primarily looking to expand their business ventures.
- Residential Real Estate: The next type of real estate is residential real estate, which is purchased for personal use. Such properties are popular among NRI investors who want to increase their capital and generate assets that they can use when they return to India from their jobs abroad. These properties are also raised on rent, with the owner earning a consistent income from deposits made by tenants. A large-scale NRI investor does not favor such real estate investments because the profit margin is lower and the maintenance costs are higher than in CRE.
- Agricultural Land: NRIs are exempt from purchasing agricultural lands in India under the rules of the Foreign Exchange Management Act of 1999. If an NRI wishes to purchase agricultural land in India, they must go through a separate request procedure with the RBI, where the purchase is still uncertain.
- Farmhouse or Plantation Property: As with agricultural lands, NRIs are not permitted to purchase Farmhouse or Plantation property. However, there are some exceptions to this rule, such as when the individual inherits the property, in which case it can be requested as a property investment.
But, how can NRI invest in Indian real estate?
NRIs can invest in real estate properties available to them through the following channels. But, traveler’s cheques (pre-paid, pre-printed fixed amount cheques for cross-border payments) and foreign currency notes are not accepted. All payments must get made solely in India.
- Self-Transactions involving:
- In India, funds get held in NRE/NRO/FCNR (B) accounts.
- Funds transferred to India from abroad (on one’s account; cannot pay the seller directly).
- Loan Facility (in INR) in India for NRIs; close to 80% of the property value based on the NRI’s eligibility, which gets repaid through:
- Remittances From Abroad (money transferred into your account from abroad)
- In India, funds get held in NRE/NRO/FCNR (Bank) accounts.
- Rent from the recently purchased property.
- Crediting the borrower’s loan account by close relatives (under section 6 of the Companies Act, 1956).
Can NRIs sell their real estate property in India?
An NRI can sell real estate in India that they have purchased or inherited to an Indian resident, NRI, or PIO. However, when selling agricultural land, plantation property, or farmhouses, the property must be sold to an Indian resident. Following the sale, the sale proceeds are repatriated to the country of residence. And in this case, you must adhere to certain guidelines established by the RBI under FEMA.
Does NRI investment in Indian real estate attract tax?
NRIs will incur long-term capital gains of 20% if they sell the property after three years from the date of purchase. Gains get calculated as the difference between the indexed cost of purchase and the sale price.
The cost of purchase adjusted for inflation is known as the indexed cost of purchase. In the case of inherited property, the date and cost of purchase are assumed to be the date and cost to the original owner to calculate the period of holding and cost of purchase. NRIs get required by law to pay a TDS of 20%. If they sell the property within three years of the purchase date, they will be subject to a TDS of 30%, regardless of the tax slab. Short-term capital gains get calculated as the difference between the sale price and the purchase price. Short-term capital gains are not eligible for indexation.
Why should you choose Assetmonk for real estate investments?
Assetmonk is India’s fastest-growing wealth-tech platform focused on commercial real estate investments. Catering to investors from all over the world, Assetmonk offers high-quality investment opportunities at reasonable prices via fractional ownership. NRIs can easily access grade-A assets without any time-consuming hassles. Keen to understand individual investor objectives like passive income, capital appreciation, and risk mitigation, Assetmonk offers investment products based on varied risk appetites.
RBI Guidelines For NRI Investments In Real Estate FAQ'S:
Non-resident Indians (NRIs) do not need prior permission to buy or sell immovable property in India.
NRIs can purchase and transfer immovable property in India on a five-year lease, and they can inherit immovable property in India from a resident.
NRI investment in India gets regulated by the Government of India’s Foreign Direct Investment (FDI) policy and the provisions of the Foreign Exchange Management Act (FEMA) 1999.