NRI Investors buying property in India
Buying a property (residential/commercial) back home is the top-most priority of every NRI (non-resident Indian). The enquiries from NRIs especially from the Middle-East, Europe, the US and Singapore for buying property in India are also rising. The enquiries go up further when rupee slides. This is a common feeling among NRIs that when the rupee rides low against the dollar, they start looking to accelerate investment plans back home in India. The NRI traffic is coming primarily from the US, UK, Canada, Australia, Singapore, South-Africa, China, UAE/Gulf regions (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE). The demand is more for high end properties and commercial buildings.
Indian Real-Estate market has always been the best destination for any NRI who wants to invest money in India. So the growth of this sector has a major contribution by the NRIs.
A non-resident Indian can buy either a residential property or a commercial property or both in India. Further, there is no limit on the number of residential or commercial properties that an NRI can purchase in India. Though there are no restrictions as to the number of properties an NRI can purchase or retain in India but he is allowed to remit sale proceeds of only two properties out of India as per the existing guidelines.
No RBI permission is required to buy residential or commercial properties. But the point of exception is, an NRI cannot buy agricultural land, plantation land or a farmhouse in India. Even he cannot acquire such property as a gift. However there is no bar on inheriting such properties.
An NRI can take on lease an immovable property for a period not exceeding five years for without taking permission from the RBI. The NRIs who have property acquired in the country can rent out the property without the approval of the Reserve Bank. The rent received can be credited to NRO or NRE account or remitted abroad.
An NRI can avail home loans for any property ready for possession or under-construction, construction of property on an owned plot or for alterations to the existing property. Buying of a plot also qualifies for a home loan. For loan purpose; NRI’s income, place of residence & educational qualification plays a major role. It is important to note that only graduate NRIs can avail home loans in India.
The RBI has granted general permission to NRI’s and foreign citizens of Indian origin, to let out their residential properties acquired for their bonafide residential purpose but which on account of their residence abroad, are not required for their immediate residential purpose. However, there are restrictions regarding the repatriation of the rental income earned from such letting out of the property. The rental income is on a non-repatriation basis. Thus as indicated above, these rental income must be credited to the NRO Account/ Resident Accounts in India only.
The repayment needs to be made in Indian rupees only and the repayment of these loans can only be through non-resident external (NRE) or non-resident ordinary (NRO) accounts with remittance from abroad. In case an NRI changes his status once he returns to India permanently then he has to inform it to the banks and basis the same the existing loan conditions and clauses has to be reworked if required.
The property investment story in India is growing bigger by the day as more and more foreign funds are coming in to cash on. India is thus zooming away in the face of a real estate boom. There is property boom in any direction you wish to see. Whether it is Gurgaon, Noida NCR, Bangalore, Pune, Calcutta, Chennai or Hyderabad or even already sky high Mumbai and Delhi – the story is the same.
The concern is that Indian stock market is at the height of a boom. So asset relocation is happening. Investors are rushing to put their money in a safe place. Also, add the foreign exchange glut in India fuelled to a great extent by software engineers parking their dollar salaries in real estate. Relatively low interest rates over the last few years made bank loans easier.
Indian government has also opened the construction and property development sector for foreign direct investment. They have allowed 100 per cent FDI in the vital infrastructure sector in order to spur investment. And also for the first time it has thrown open the lucrative parts of the Indian property market to global investors.
The boom is also attracting interest from Indian Diaspora in foreign countries. In recent years, NRIs have played a very important role in transforming the Indian property market. Opening-up of the Indian economy provided NRIs with new opportunities and they have shown a great deal of confidence in it. They have invested a sizeable amount, of which a big chunk in property market. Participation by NRIs has brought about a lot of maturity in the market which in the past had solely banked on the actual users.
Various lucrative avenues are being created and offered to invite maximum investments from abroad. The NRIs have responded quite positively, showing keen interest in India’s real estate market. NRIs are investing a lot in residential and commercial properties to cash upon the increasing property demands.
NRIs are allowed to participate in real estate investments by way of investments in variety of infrastructure projects. It can be the construction of residential and commercial properties, development of townships at city and regional level, constructing infrastructure facilities like roads and bridges in urban areas and investment in participatory ventures. The status of an NRI as a property owner is not much different from the Resident Indian; just like any other property owner, NRIs pay property tax to the concerned authorities, though NRI property tax is slightly different from what Indian residents pay. So NRIs and also PIOs are legally permitted to acquire any kind of immovable property in India, with the exception of agricultural land, a plantation or a farmhouse.
NRIs can fund investments through their own funds. Own funds are funds an NRI receives in India by way of inward remittance from overseas, out of income earned overseas or personal savings outside India, or funds held in non-resident external (NRE) or non-resident ordinary (NRO), or foreign currency (non-resident) (FCNR) bank account for purchasing real estate in India.
NRIs can also avail loans. NRIs get complete support from the financial institutions and banks for the finance required for the purpose of investment in properties in India. NRIs are eligible for availing a home loan facility to purchase a property in India; in fact they are considered a safe profile due to their good repayment capacity. As far as the process of the repayment of the home loan is considered, it can be made through a normal banking channel by way of inward remittance. It is also possible to repay by way of direct debit into the NRE account or NRO account. Online banking in India, and these special accounts for NRIs, has facilitated transactions for any kind of NRI investment in India. The quantum of loans, margin money and the period of repayment is at par with the housing loans provided to residents in India. The installment of loan and interest and other charges has to be paid by the NRI / PIO by remittances from outside India through normal banking channels, or out of funds in the NRE/FCNR/NRO account in India. In the last case, the loan and interest can also be repaid out of the rental income of such property.
If you are interested to invest money in real estate sector in India whether you want to buy, sell , rent residential or commercial property in New Delhi, Gurgaon, Noida NCR or in any other city, please contact us for more information.
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