The market appears to be improving, with lease activity picking up in the top seven cities in 2021. Many offices already have opened, and many more are expected to start soon. As a result, this is an excellent moment to invest in commercial real estate.
Frequently Asked Questions About NRI Investments in Indian Real Estate
Regardless of well-intentioned recommendations from friends and relatives, NRIs should seek competent real estate guidance. Tenancy discussions, repairs, general monitoring, and the regular buy/sell dilemma must all be completed. A competent Real Estate Advisor delivers a consistent supply of market information, topical counsel, and an effective portfolio management support system. Such services are not costly and provide NRIs with peace of mind when they are abroad from India.
NRIs frequently maintain and sustain a full-spectrum portfolio that includes all asset classes, such as stocks, mutual funds, FDs, and real estate. Along the same lines as Wealth Advisers, competent professional advisors may be accessed for a broad variety of property services and guidance. A home is not just a large investment, but it also demands ongoing care and upkeep. This phenomenon is most familiar to NRIs. Our foreign brothers and sisters frequently rely on their local friends and relatives for advice and execution on significant things such as purchases, sales, maintenance, tenant search, and so on.
There is still a lot of misunderstanding about why NRIs should invest in India’s real estate market, what makes it a profitable investment, and a variety of other topics that are frequently misunderstood. Let’s look at some of the most often asked questions about NRI investments in India.
Who is an NRI?
A Non-Resident Indian (NRI) is an Indian person who remains abroad for employment/business or profession, or who stays abroad under conditions suggesting a desire to stay abroad for an indefinite period. Persons posted in United Nations Organizations and officials deputed overseas on temporary assignments by the Central/State Government and Public Sector Undertakings (PSU) are also considered NRIs. Non-resident foreign citizens of Indian origin receive the same treatment as NRIs.
Who is a PIO (Persons of Indian Origin)?
A person of Indian Origin (PIO) is someone who has never possessed an Indian passport and is not a citizen of Pakistan, Afghanistan, Bangladesh, Iran, Sri Lanka, Nepal, China, or Bhutan (57 of 1955).
A PIO is also a spouse (who is not a citizen of Pakistan or Bangladesh) of an Indian resident or a person of Indian descent.
Who may acquire immovable property in India?
An NRI can acquire any property in India, according to Reserve Bank of India (RBI) regulations. Any Person of Indian Origin (PIO), an individual who is not a citizen of Pakistan, Bangladesh, Sri Lanka, China, Afghanistan, Nepal, Iran, or Bhutan, can purchase immovable property in India if he/she held an Indian passport at any time or (ii) his/her father or grandfather was a citizen of India under the Indian Constitution or the Citizenship Act, 1955.
What documents are necessary to purchase a home in India?
- A pan card (Permanent account number)
- OCI/PIO card (if applicable)
- A passport (In case of NRI)
- Passport-sized photos
- Address verification
What kind of properties cannot an NRI/PIO purchase?
In most cases, an NRI/PIO cannot purchase agricultural land, plantation property, or farm buildings in India. Proposals to purchase such land must be explicitly approved by the RBI in collaboration with the Government of India. They can only obtain agricultural land by inheritance.
Is there a cap on the number of homes that NRIs my purchase?
In India, an NRI/PIO can purchase up to two residential homes. This is because if an NRI purchases two homes, repatriation of cash from an NRE account is not permitted for more than two residential properties. If the funds come from a rupee account, the individual must keep the money in the bank or even in India for ten years.
How does an NRI complete a property purchase transaction?
Funds can be transmitted to India from overseas via standard banking channels or via balance in an NRE, NRO, or FCNR account when making a property purchase payment.
What are the advantages of non-resident Indian investing in India?
Here are the top three reasons why NRIs should consider investing in Indian real estate:
- Since there is no limit to the number of properties that may be purchased, NRIs can invest in as many residential properties and commercial properties in India as they like and receive rental income from them.
- These investments provide substantial returns on a small initial commitment.
- There is also the benefit of seeking tax deductions on income earned from property investments in India.
How do NRIs maintain track of their investments?
Delays in the conclusion of real estate projects have long been a source of concern in the Indian market, resulting in one’s cash being trapped for years. However, with RERA in place, a real estate developer is now required to deposit 70% of the capital money gathered for a project in an escrow account, which is subsequently released as the project advances. One of the most important criteria in establishing confidence in NRI investing alternatives in India is the transparency of monies employed.
What is the tax treatment of real estate investment gains?
Any rental income from a property expansion in India is considered income earned in India and is taxed, regardless of the person’s residency status. The investment can provide rental income as well as short- and long-term financial gains. After just a standard deduction of 30percent TDS from rental income, the remainder is added to total income and taxed at usual rates.
In terms of capital gains, if an NRI sells his or her property after two years after the acquisition, the proceeds are deemed short-term capital gains and are taxed at the corresponding slab rate. If, on the other hand, the property is retained for more than two years, the advantage will be long-term capital gains that will be taxed at a rate of 20% after indexation.
Home Loans for Non-Resident Indians
If you want to secure a home loan, now is a wonderful time to buy a property because interest rates are at an all-time low of 6.5 percent in some institutions. For any real estate acquisition, a loan worth up to 80% of the property price is available. Banks provide loan payback terms of up to 30 years; however, the loan balance is determined by the individual borrower’s profile.
What are the rules for the repatriation of monies derived from the sale of immovable property by an NRI/PIO?
According to RBI guidelines, if the property was obtained through conventional banking channels/by debit to an NRE/FCNR (B) account, the sum to be repatriated should not exceed the amount paid for the property.
If the property is purchased in rupees, the NRI/PIO is entitled to remit up to USD one million each fiscal year from the balances kept in the NRO account.
Is rental income from real estate reimbursable?
Rental income from the property is repatriable following RBI regulations. Rental income is taxable and requires confirmation from a certified accountant.
Assetmonk is India’s fastest-growing wealth-tech platform, specializing in commercial real estate investments. Assetmonk provides services to investors from all around the world. Through fractional ownership, it also offers high-quality investment options at moderate costs. Without any time-consuming hurdles, NRIs can acquire access to grade-A assets. Assetmonk provides investment solutions depending on risk tolerance and specific investor goals such as passive income, capital appreciation, and risk management.
Additional NRI Investment Related FAQ'S
The Reserve Bank of India has issued a circular allowing NRIs to purchase either commercial or residential property. This indicates that NRIs can purchase property in India. Permission from of the Reserve Bank of India is not required for an investment.
NRIs who want to invest in real estate in India should open an NRI account with any of the permitted Indian banks. NRI property investors must route their transactions via Indian banks, and they must utilise NRE/NRO accounts for any inward money remittances.
Sections 80C and 80TTA of the Income-Tax Act of India also permit various tax deductions. The streamlined payments rule also enables NRIs to continue investing in India’s real estate industry. When acquiring a home, NRIs can deposit funds in their NRO account to pay their seller from in this account.
The NRI population has a distinct edge in that they may transform their hard-earned overseas cash into attractive investment opportunities in India. With the rupee at an all-time low of Rs 75+ versus the dollar, real estate investing has become more inexpensive and attainable.