Rules for Real Estate Investment in India for NRI

by admin on October 30, 2022

The Indian real estate sector has always remained a hot favourite for property investors, especially Non-Resident Indians (NRIs) . Regardless of where they live, the feeling of purchasing a property in India is truly remarkable for NRIs. NRIs can buy or own immovable property in India in compliance with the FEMA (Foreign Exchange Management Act) regulations. Even though it may appear to be simple, there may be a few factors that NRI purchasers should be aware of before making a Real Estate Investment.

FEMA Rules Regulated by RBI

The Reserve Bank of India has eased the Foreign Exchange Management Act (FEMA) requirements, making it easier to invest in real estate in India and according to the rule, any NRI with a valid passport who wants to buy a commercial as well as residential property in India, except perhaps a plantation, agricultural land, or even a farmhouse, must have a valid passport. The latter properties are only available for acquisition if they are gifted or inherited by either an NRI through succession. Otherwise, they must obtain government and RBI approval before purchasing any of these restricted assets.

Citizens of Sri Lanka, Pakistan, Bangladesh, Afghanistan, Iran, China, Bhutan, or Nepal are not allowed to purchase real estate and lay NRI real estate investments in India.

Power of Attorney (PoA)

This is mandatory for NRI real estate buyers, as they may not be physically present in India at the time of the property transaction. Through PoA, NRIs have the option to transfer legal rights to their trusted friends or relatives to complete all purchase procedures on their behalf. PoA can be used for leasing, selling, mortgaging, borrowing, renting, and so on.

Home Loans for NRIs

The Reserve Bank of India has allowed housing finance businesses and banks to give home loans to non-resident Indians for the purchase of real estate in India. NRIs, like any other Indian citizen, can get a home loan of up to 80% of the value of their property. The loan is granted in Indian Rupees, and the borrower is required to pay the loan using Indian Rupees. It can be paid in the following ways:

✓Banking channels by way of inward remittance

✓NRO/NRE/or FCNR (B) account

✓The rental income

✓The close relative of the borrower, by crediting their account

• The payment toward home loans cannot be made through travelers’ checks or foreign currency notes. Also, payments made outside India will not be accepted.

EMIs and the Forex

One of the simplest methods to repay a debt is to pay it back in equal monthly payments. Changes in the foreign exchange rate, on the other hand, may have an impact on your EMIs and add to your concerns. As a result, it is always advisable to pay through rentals.

Taxation and Tax Benefits for NRI buying property in India.

Let us take a look at the tax for NRI buying property in India. India has signed a Double Taxation Avoidance Agreement (DTAA) with more than 85 countries across the world. This agreement applies to an NRI who works and resides in one country and pays his taxes, as well as earns income in a different country through a real estate investment or by other means. Like any regular Indian the NRI buyer is liable to pay taxes on the rental income, short-term, and long-term capital gains. Any property that is held by an NRI for more than 2 years (precisely 24 months) will be considered a long-term capital asset. This asset will be taxed at 20%. Like any regular Indian buyer, an NRI can claim the tax exemption under sections 54, 54EC, and 54F.

If the property is empty and claimed for self-use, the NRI will be excluded from wealth tax. Otherwise, they can rent it for at least 300 days each year to avoid having to pay the wealth tax. This provision only applies to the very first property; in the case of numerous properties, the buyer must pay a wealth tax of 1% on all property values over $30,000.

At Starwing Developers we treat all our buyers equally. If you are an NRI interested in investing in premium segment homes in Mumbai, you can get in touch with our team, who will help you clear the process easily. If you are not physically present in India then you can also approach us through a friend or family member, who acts on your behalf through a PoA.

FAQs NRIs buying property in India.

*     Can NRI buy a house in India?

Yes, an NRI can make real estate investments in India and can purchase both residential and commercial property in India. Furthermore, an NRI can buy an unlimited number of business and residential properties in India.

*   Do NRI pay property tax in India?

NRIs who sell residential property in India must pay capital gains tax. The amount of tax due on capital gains is determined by how much the gain is short-term or long-term.

*   What are the benefits of an NRI account?

In an NRE or foreign currency account, interest is tax-free. NRI accounts are useful for repatriation since they allow for the easy flow of funds both within India and abroad, making them handy for NRIs who really want their funds to be accessible from both outsides and in India.

Rules for Real Estate Investment in India for NRI