10 Key Things NRIs Must Know Before Investing In Indian Real Estate In 2022

By- Melby Anna Stephen

NRI investments in India have been a hot topic over the years. With the Indian government's attempt to regulate the real estate sector, providing more transparency and accountability through RERA, NRI's interest in the Indian real estate market has increased. NRIs can profit from a high return on investment and a cheaper initial capital commitment by investing in Indian real estate. There are several guidelines and regulations regarding NRI investments in India that you should be aware of to avoid any unexpected roadblocks in your investing path.

Buying a home for a non-resident Indian (NRI) has never been simpler because of new real estate legislation. If the property is not agricultural land, plantation property, or a farmhouse, anybody with an Indian passport can invest in Indian real estate.

Must-know rules for NRIs for real estate investment in India

Understanding the financial landscape is one of the most critical aspects of an NRI investing in Indian real estate. If you are NRI planning to invest in real estate in India, there are a few things to consider before you begin shopping for properties:

• Act on Regulatory Reform

If you have an Indian passport, you do not need to seek approval before investing in real estate in India. To encourage greater foreign investment, the Reserve Bank of India has simplified the restrictions. The regulations of the Foreign Exchange Management Act apply to real estate transactions (FEMA).

• Putting money into high-quality markets

The number of properties in which an NRI can invest is unrestricted. A non-resident Indian (NRI) or a Person of Indian Origin (PIO) can buy as many residential and commercial properties as they wish in India. When it comes to agricultural land, plantation property, or a farmhouse, however, foreign investment is restricted. Such properties are only permitted if the NRI in question has inherited or received them as a gift.

A strong return on investment requires investing in a property with significant appreciation potential. E-commerce and IT-related enterprises have exploded in the South Indian market, with cities like Bangalore, Hyderabad, and Chennai offering excellent returns on investment. Enlisting the services of a realty adviser will help you remain up to speed on real estate trends in India and the best emerging areas to invest in. These professionals can also ensure that you receive top-notch property management services, ensuring your safety and peace of mind.

• Funding and financial transactions

All property transactions in India should be conducted in Indian money and via Indian banks. One of the requirements is to open an NRI account with a recognized Indian bank. If his paperwork is in order, an NRI can simply obtain money for the acquisition. In India, there are multiple NRI house loan programs offered by various banking organizations. If you're having your property funded, make sure you have at least 20% of the property's value to invest from your resources. You can get money for up to 80% of the property's worth.

Any of your transactions should go through Indian banking systems, thus utilize your NRO/NRE account for all inward remittances. You can also use your NRE, NRO, or FCNR (Foreign Currency Non-Resident) account to issue post-dated checks or ECS.

Check that all of your paperwork is in order and has been confirmed by a lawyer before approaching a bank for funding. If you're buying a house, receive a no-dues certificate from the seller, and if it's inherited or jointly owned, seek to clear the title. Also, make sure no outstanding debts or payments are owing to any authority.

• Choosing a reputable contractor

If you are an NRI, you must select a builder with a solid track record in the real estate business. You must be able to trust the builder you choose to invest in because you may not be physically there to check on the condition or quality of the construction. A professional builder will also have all of the necessary permissions and certificates, which may speed up the home-buying process.

If you are looking for a trustworthy investment partner to invest with, Assetmonk can be an option for you. Assetmonk offers some of the best investment options in Bangalore, Chennai, and Hyderabad. The products offered by Assetmonk are categorized as Growth, Growth Plus, and Yield products and offer an IRR of 14-21%. The properties offered by Assetmonk are carefully vetted by professionals and listed only after careful due diligence.

If you're buying a property that's still under construction, you'll need to provide your builder or a trusted partner with power of attorney.CHuttersnap/ Unsplash

• Purchasing commercial real estate

If you're looking for a decent return on your investment, look for commercial buildings that are in high demand by blue-chip firms. This will assure regular returns as well as strong capital growth. Returns on invested capital for a well-located commercial property leased by a blue-chip corporation may range from 6-10 percent, almost double that of residential property.

• POA (Power of Attorney)

If you're buying a property that's still under construction, you'll need to provide your builder or a trusted partner with power of attorney. Seek legal advice on how to structure the paperwork so that there is no risk of forgery and your investment is protected while the property is being built. Since they do not live in India, there may be times when the mentioned individual is unable to physically purchase the property; nevertheless, POA (Power of Attorney) is available to help. This implies that an NRI can pick someone close to them, such as a cousin, friend, or even a coworker, to execute the transaction on their behalf (legally).

• Tax advantages

As an NRI, you may take advantage of most of the tax incentives available to Indian residents when purchasing real estate. Section 80 C of the Income Tax Act of 1961 allows you to claim a deduction of Rs. 1 lakh. If you sell a property within three years after buying it, it's considered a short-term capital gain, and any profits you make from it are taxed. If you sell the home after three years, you can invest in another property to reduce the long-term capital gains tax.

• TDS information for NRI Property Sale

When it comes to tax benefits, they're very much the same for anyone who lives in India. NRIs are entitled to the same tax benefits as Indian residents. Furthermore, if an NRI purchases a property worth more than Rs 50 lakh, they must pay a 1% withholding TDS.

If the property is uninhabited and classified as 'self-occupied,' they will be free from wealth tax. If they don't rent it out for at least 300 days a year, they'll have to pay wealth tax. This rule only applies to the first property. They would have to pay a tax of 1% of the value (net of existing debts) of successive empty properties exceeding Rs 30 lakh.

• Verification

NRIs should do an obligatory back check on the builder by looking at the real estate company's social media profiles and other internet forums.

• First-hand knowledge

To gain a precise notion of how pleased existing clients are with their investment, one must search for first-hand experience by contacting them online.

The Confederation of Real Estate Developers Association of India (CREDAI) holds exhibits for NRIs every month, assisting them in evaluating various investment choices and providing spot loans from major banks. There are other simple investing choices available, as well as a decrease in the down payment amount. As a result, before investing in real estate in India, you should review all of CREDAI's offerings.