Shree Sharda Realcon & Construction Pvt. Ltd.

NRI guide to buying property in india

NRIs are now turning their long held aspirations of owning real estate in India, into reality by buying property in India. NRI Buying property in India is not surprising. India’s growth story continues to fascinate the world and NRIs are looking to capitalize by buying property in India. NRI buying property in India is a no brainer as India has continued to give an average of 20% return on investment per annum even as most of the world economies are in recession.

More importantly NRI buying a property in India has become more prevalent as many avenues are being created as well as schemes being fashioned for NRI/PIO/OCIs to bring in maximum investment from abroad.

Below is a quick overview on developments that have led to an increasing interest and inflow of investments from the NRI community worldwide.

All persons residing outside India holding Indian passports and also people of Indian origin have been granted permission by the Reserve Bank of India (RBI) to invest in both residential and commercial properties in India.

The government including RBI and Foreign Exchange Management Act (FEMA) has liberalized the rules and regulations for the NRI buying property in India. Liberalization along with the added advantage of repatriation of the capital invested and even the rental proceeds under the circumstances prescribed by RBI have also encouraged NRI to buy property in India. Capital gains accruing from any sale of property can be remitted out of India after paying capital gains tax. This has encouraged NRI to buy property in India as it has been a big concern within the NRI community on repatriation of funds abroad.

With most world economies facing a slowdown, NRI buying a property in India has had a return on an average of 20% pa and in some pockets like Gurgaon a return of 50-60%pa. India is a safe destination – a brisk economy and a huge population fuelling it.

To an NRI buying a property in India, a base in the homeland also brings with it a sense of security. The number of NRIs who are investing in property for sentimental reasons and for better investment returns is quickly multiplying.

As opposed to earlier times when an NRI had to struggle with Municipal rules, income tax and wealth tax issues, succession legislations for all religions, the Hindu joint family Act, land ceilings and others, these are times that have NRIs being welcomed with a red carpet. The flexibility in rules has elicited an extraordinary response from the NRI community.

The NRI buying a property in India can now raise financing from financial institutions to purchase a residential apartment / flat. The Housing Development and Finance Corporation (HDFC), ICICI, Axis Bank and other financial institutions in India are facilitating the NRI investment in property speedily and efficiently. The repayment of the home loan can be made through a normal banking channel by way of inward remittance. For those who earn an income in India through rent, dividends, pension, etc the loan can be repaid by way of direct debit into the accounts of Non-Residents External [NRE] or Non-Resident Ordinary [NRO] accounts.

Professionals have been suitably empowered to deal with the matter of remittances. NRIs are free to repatriate in foreign currency their current earnings in India such as rent, dividend, pension, interest and the like based on appropriate certification.

Online NRI banking in India and these accounts for NRIs have made life much easier for transactions involved in NRI investment in India.

What has also made NRIs flock to India has been the initiative by builders and real estate dealers to ensure transparency about the projects on offer and fairness in dealings. NRIs consider their investments to be safe and rewarding when they park their money in real estate India.

Will rupee fall bring NRI real estate investors in India? The properties which an NRI can purchase in India: As per the general permission issued by RBI, an NRI and a Person of Indian Origin (PIO) can purchase any residential or commercial property in India without any specific permission from RBI. However an NRI is not allowed to buy any agricultural land, plantation property or farmhouse in India without specific permission from RBI. RBI guidelines on home loan for buying residential accommodation: RBI has given general permission to banks and Housing Finance Companies (HFCs) registered with National Housing bank to grant home loan to NRIs for the purpose of buying residential house property in India. As per these guidelines, the loans to be granted to NRIs shall be on the same basis and criteria as those are applicable in case of resident Indians. These would include the loan amount eligibility based on the income, tenure of the loan and the extent to which the lenders can finance purchase of residential house property by NRIs. It may be noted that these loans shall be given in Indian Rupees and shall also be repayable in Indian Rupee. It is interesting to note that as per the regulations, the amount of loan cannot be credited directly to the bank account of the NRI and thus by implication should only be disbursed to the seller or the builder. In case where the NRI has already paid the consideration, the loan cannot be availed subsequently. The home loan to NRI shall be secured by equitable mortgage of the property which the NRI intends to purchase. The lenders are also allowed to accept any other assets in India as security. Repayment of the home loan: The home loan taken by NRI from these banks/ housing finance companies can be serviced through various sources. Since the NRI is working outside India, it is always convenient for him to pay the EMI by way of remittances through the banking channels. The loan can also be serviced out of the funds lying in his credit in any of the banking accounts like his NRE account, of his FCNR deposits. Even the home loan taken by him can be repaid out of the funds lying in his NRO account. The RBI even permits the rental incomes received on such property to be used for the purpose of servicing of the EMIs. Repatriation of the sale proceeds: In case he has purchased any property through home loan, he cannot repatriate whole of the sale proceeds. There are some restrictions on repatriation of the funds. Though there are no restrictions as to the number of properties an NRI can purchase or retain in India but he is allowed to remit sale proceeds of only two properties out of India as per the existing guidelines. Moreover only the portion of sale proceeds which was paid using the foreign currency can only be repatriated. This will include the money remitted directly from abroad as well as money utilized out of the Foreign Currency Non Resident Account or NRE account. However in case the funds were used from the NRE account, the amount to be remitted would be restricted to equivalent foreign currency used on the date of payment. The above money will include the down payments made as well as amounts remitted/used for servicing of the housing loan out of the above sources. It is pertinent to note that an NRI can sell the property so purchased anytime and there is no lock-in period for selling the property so acquired. In addition to the above amount he can remit an amount equal to USD One Million every year from your NRO account. So from the above discussion it becomes clear that home loans are available to not only the resident Indians but also to non residents as well as to persons of Indian origin on the same terms and conditions. Moreover you are allowed to remit back the money to the extent foreign exchange was used for the purpose of buying of the property and servicing of the loan