Thinking of Buying Property in India? Here’s What You Need to Know

As an NRI you will be excited to invest in one of the most lucrative real estate markets. The real estate market reflects the growing economy of the country and rightly so. Most investors have gained significantly after buying property in India in the past decade as property prices have increased consistently. A non-resident Indian can make most of the currency difference which gives them leverage to invest in any property they choose. Although the picture seems perfect, investing in India involves investors being aware of the regulations and policies that need to be followed. The importance of doing the requisite research cannot be undermined.

Let us look at the important aspects involved:

1. Regulations

The Foreign Exchange Management Act has laid out certain rules for NRIs who wish to own an immovable property in India. NRIs can buy and own any immovable property except agricultural land, farmhouse, and plantation property in India unless they have been gifted or inherited. However, they can own these too by getting the required permissions from the government and the Reserve Bank of India (RBI).

2. Tax Benefits

An NRI wanting to buy property in India is liable to pay taxes on incomes earned from immovable property, be it rented or owned. However, they enjoy the Double Taxation Avoidance Agreement which allows NRIs to work and live in one country and earn incomes on real estate investment in other countries. According to the act, NRIs will not have to pay taxes only in the country where the income is generated. India has signed this agreement with more than 85 countries worldwide.

Property held for more than two years is considered as then the tax liable is 20%. The first property is exempted from wealth tax if it is declared for self-use while multiple properties attract a wealth tax of 1%.

3. Home Loan

NRIs are eligible to get loans of up to 80% of the property value for their investments in India. The disbursement of the sanctioned loan and its repayment must be in Indian currency. The loan amount is directly transferred to the developer’s bank account.

For repayment one of the following channels can be used as repayment made outside India is not accepted:

• Inward remittances through banks
• NRO/NRE/FCNR(B) account
• Rental income
• Crediting money to a close relative’s account.

4. Surpassing middlemen like brokers and agents

NRIs should consider buying property from the developer directly. By eliminating middlemen, they can save considerably on costs and time. It is also difficult to be in communication with agents or brokers when operating from another country, especially when they are strangers.

NRI real estate investment requires some research work before finalizing the property for their investments. Location, developer’s reputation, growth potential, and return on investments are important considerations before investing in property in India.