One of the hottest investment prospects for NRIs these days is real estate as a proper strategic investment in real estate can fetch an amount of return like no other. However, investments in real estate can differ, some may purchase a piece of land while others may purchase a house, either to hold it for a period of time and sell it or just for the purpose of accommodation. Some NRIs also purchase a house in India to settle in once they retire and move back.
Over the years, investments in real estate have also become relatively hassle-free. Given below is a guide to investing in real estate in India as an NRI-
Type of properties an NRI can purchase-
NRIs can purchase residential properties as well as commercial properties with the exception of agricultural land, plantation property, and farmhouses, which can only be received in the form of a gift or inheritance.
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Modes of payment-
An NRI can purchase real estate in India through the funds in their Non-Resident (External) Rupee Account (NRE Account) / Non-Resident Ordinary Rupee Account (NRO Account) / Foreign Currency Non-Resident Account Account (FCNR Account).
Alternatively, an NRI can purchase property through various loan facilities, up to 80% of the property value (which can differ based on various eligibility criteria). However, all transactions need to be made in Indian currency only.
What are the documents required to invest in real estate?
Investing in real estate just requires NRIs to carry basic documentation such as a passport, address proof, a permanent account number (PAN Card), and recent photographs.
Tax slabs on investments in Real Estate-
In terms of tax deductions on properties purchased, a 1% TDS on purchase value is levied on properties purchased from residents (Rs. 50 Lakhs and above) and in the case of properties purchased from NRIs, a 20% tax is levied on long term gains and 30% tax is levied on short term gains. In terms of income from rent, a 30% tax is levied, deductible by the tenant.
Repatriation of rental income- NRIs can repatriate rental income from India without any restrictions and special permissions (provided it does not exceed $1 million per year).
Repatriation of sales proceeds- In case a property is inherited from an Indian resident or acquired by an NRI when he was an Indian resident, then the NRI can repatriate up to $1 million per financial year from the sales proceeds. Repatriation can be freely done by an NRI from payments made from outside India (while they were an NRI) as long as they comply with the FEMA regulations.
Why should an NRI invest in Real Estate in India-
1. Benefit of rental income- NRIs can benefit from attractive rental income (in well-established areas).
Long Term Returns- NRIs can make the most of the long term returns earned from the booming real estate sector in India.
Tax Benefits- NRIs can benefit from tax exemptions on home loans (such as Sec 80C where deductions up to the stipulated limit can be claimed on repayment of the loan principal amount).
Power of Attorney- A special provision known as the power of attorney can be made use of by NRIs to buy, manage and sell property in India on their behalf.