Rules For NRI Investment In The Indian Real Estate
Making an investment in Indian real estate is a popular choice made by NRIs across the globe, and the recently implemented economic and regulatory reforms have further boosted foreign investments into India’s realty. Moreover, the falling rupee has got an increasing number of NRIs rushing to invest in property in India, in order to earn lucrative returns.
If you are an NRI looking to invest in the Indian real estate market, here are some rules you may want to be familiar with:
1. According to the Foreign Exchange Management Act (FEMA), an NRI (Non-Resident Indian) or PIO (Person of Indian Origin) can acquire, by way of purchase, any immovable property in India, other than agricultural land/plantation property/farmhouse. As an NRI, you can invest in both residential and commercial properties in India. However, any agricultural land, farmhouse and plantation property can only be owned if it is acquired by way of inheritance or is gifted.
2. As an NRI, you can make the payment for the property purchase out of funds remitted to India through a regular banking channel or through funds held in a NRE/ FCNR (B)/NRO account that is maintained in India. Payments made outside of India and through foreign currency notes or traveller’s cheques do not qualify.
3. Like resident Indians, NRIs as well as PIOs can apply for a home loan in India for up to 80 per cent of the property value, depending on individual eligibility. The loan can be repaid through any of the following channels:
· Inward remittance through regular banking channels.
· By debit to self NRE/FCNR (B)/NRO account.
· By close relatives of the borrower, as defined in Section 6 of the Companies Act, 1956, through their account in India, by crediting the borrower’s loan account.
NRI property owners can also choose to repay the loan using the rental income generated by the property.
4. NRIs can earn ROI in terms of rental income, short-term capital gains and long-term capital gains. While all of these incomes are taxable, an NRI investor can avail of the same tax benefits on property purchase as a resident Indian. The tax slab rate is variable and exemptions can be claimed under sections 54, 54F and 54EC. Under Section 80C of the Income Tax Act, the NRI investor can claim a tax deduction of up to Rs. 1 lakh
5. For NRIs investing in an under-construction property, the power of attorney may have to be transferred to the developer or a trusted person for smoother and efficient dealings.
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