May 27, 2022

Points NRIs should keep in mind while buying a home in India

NRIs or non-resident Indians have always played a critical part in the real estate market in India, whether they buy properties as investment or driven by the emotional connect with near and dear ones back home. Either way, the NRI property-buying trend has seen significant propulsion of late, buoyed by the dwindling rupee, there has been a significant increase in the total transactions carried out across the country over the past 16 months, according to surveys by Pioneer Property.

Given the complexities of regulations in this segment, it’s important to keep in mind certain points if you are an NRI on the cusp of taking the plunge in the Indian realty market.

Here, we list a few such points which could serve as a ready reckoner:

# Nature of the property: As an NRI, you are permitted to buy any immovable property in India, with the exception of agricultural land, plantation property or farmhouse. For the latter kind of properties, you will require permission from the RBI and the Union government.

# Tax benefits: As an NRI, you enjoy certain tax benefits while transacting in property in India. Suppose you sell off a property within 3 years of its purchase, the deal will come under the dragnet of short-term capital gains tax, which is to the tune of 30.9%. However, if you wait and sell the same property after 3 years, it will be considered long-term capital gain (around 20.6%) and you can invest the sale proceeds in another property.

# Mode of transaction: As an NRI, you cannot pay for a property in India in foreign currency. You must pay in Indian currency only and for that, you first need to open an NRE (non-resident rupee) or NRO (non-resident ordinary rupee) account in any Indian bank or an FCNR (foreign currency non-resident) deposit account that will safeguard you against fluctuations in forex rates. NRIs can also apply for home loans if required. However, the repayment has to be made in Indian currency only, from any of the above-mentioned account types.

# Home loan: All Indian banks and housing finance companies registered with the National Housing Bank are empowered by RBI to disburse loans to NRIs for purchase of residential real estate in India. As mentioned in the earlier sub-head, the loan amount will be sanctioned and has to be repaid in the same currency. The only catch is that the loan amount, instead of being directly credited into the NRI’s bank account, will be disbursed to the developer’s or the seller’s account. The loan can be repaid by the NRI using his/her NRO/NRE account or FCNR deposits.

# Power of attorney: Any NRI has the privilege to give PoA to friends or relatives residing in India to complete the transaction process regarding purchase of a property in India on his/her behalf. The PoA can apply to umbrella access or specific rights that can be exercised by the NRI’s representative.

# Verifications: Before settling on a property for purchase, as an NRI, you should do a meticulous due diligence exercise on the developer’s track record, talk to residents already staying there (in case of a gated community) and look at all your available options in your preferred location, before you zero in on your choice.

# EMIs and Forex: While it is easy to repay loans through EMIs, you could be hit hard by fluctuations in foreign exchange rates. If you can use the rental income for payment, it offers a critical and convenient safety valve against forex market uncertainties.

# Repatriation of funds: For repatriation of funds to the foreign country, you will have to adhere to certain guidelines set for NRIs. A person of Indian origin (POI) or an NRI is entitled to repatriate the entire proceedings from the start of the process of sale of a property. However, the property purchase in India has to be done following FEMA (Foreign Exchange Management Act) directives applicable at the time of purchase and the repatriated amount cannot exceed the original amount as submitted.

As an NRI, if you factor in all these points and with the added insurance of RERA and also GST, there are ample in-built checks and balances in the Indian real estate market now to give you comfort and peace of mind while investing. With the general outlook in the realty domain looking very bright in the post-pandemic scenario, the NRI segment’s share of this burgeoning pie is sure to grow consistently, market watchers concur.

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