December 1st, Author: Varma
This is an exciting time for Non-Resident Indians (NRIs) wishing to invest in property in India. However, they should be aware of the regulations which govern the buying & selling of property & for the income they earn from the investment. NRIs from a significant segment of investors willing to put their money in the real estate sector. They either buy properties in India for investment or for an emotional connect with their country or for settling back after they retire. Real estate market in India has emerged as a lucrative opportunity & overseas investments have surged. According to some surveys, cross-border global real estate transactions account for almost 30 percent.
FEMA Rules to Keep in Mind
There are some Foreign Exchange Management Act (FEMA) regulations which NRIs should keep in mind while buying property in India. The Reserve Bank of India (RBI) has formulated some simple rules for NRI investments in real estate.
NRIs or people of Indian origin as defined by FEMA can acquire immovable property in India by way of purchase, other than agricultural land, plantation property or farm house. This is general permission given by the government of India. However, citizens of Bhutan, Nepal, Iran, China, Afghanistan, Sri Lanka, Bangladesh or Pakistan will not be able to do so. Nevertheless, they can lease property not exceeding five years without the consent of RBI.
Properties Where NRIs Can Invest
NRIs are allowed to invest in residential as well as commercial properties in India. However, they can own farmhouses, plantation properties & agricultural land only if they have inherited or gifted to them.
Financial Property Transactions by NRIs
For property transactions in India, NRIs can use the following methods.
Eligibility for Loans by NRIs
NRIs can avail home loans in Indian rupees for property purchase like any normal Indian citizen. Depending on individual eligibility, almost 80% of the property value can be paid through loans. Criteria for payment of loans can be the following.
Taxation on Profits Earned by NRIs
Wondering how you would be taxed for the properties you have earned through property investments. Here is a break-up! You can earn returns through real estate investments in the form of rentals or short or long-term capital gains.
NRIs opting for under-construction properties will have to provide a power-of-attorney to a trusted associate in order to complete the deal. It is also crucial to hire a lawyer for preparing the document so as to ensure to avoid surgery & make sure that the investment is secure.
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