Things You Should Know about the Purchase of Property by NRI in India!

With the globalization factor on the increase, many Indians living in foreign countries as Non-Resident Indians (NRIs) want to invest in properties back in their home country. Be it for investment purposes, a second home, or for owning a house for oneself, property investment in India has its advantages. However, the process here is not very simple and anyone who wants to go through the process must ensure that he or she understands all the compilations concerning the process. If you are an NRI planning to purchase a property in India, here is an interesting read about the purchase of property by NRI in India that could assist to get over this process. 

Why Invest in Indian Property? 

Before diving into the complexities, let’s explore why the purchase of property by NRI in India is a marvelous idea:

1. Growing Market: 

As for the real estate market in India, it has demonstrated steady growth over the years. The main reason is the continuing development of urbanization and steady improvement in the affordability rates for basic needs through increasing per capita income. 

2. High Returns: 

The provision of real estate in India can prove to be highly gainful. Most of the NRIs regard property investment as a possible investment diversification and a guaranteed source of income through rents. 

3. Cultural Connection: 

Purchasing property in India becomes a link between the foreign countries and India for many Non Resident Indians. In visits, it provides the clients with a sense of comfort with belonging and a home to run to. 

Understanding the Legal Framework 

The legal environment or system is the first consideration when one is planning to buy a property in India. How are Non Resident Indians allowed to own properties and to what extent are they bound with the legal clauses of the country? 

1. Types of Properties: 

NRIs are allowed to purchase houses and other kinds of properties in the neighboring country that is India. Nevertheless, they cannot buy agricultural land and plantation property or farmhouses. 

2. Legal Restrictions: 

NRIs are allowed to own property in India on account of certain conditions with FEMA, among other regulations. It must be proper and legal to acquire the property and legal compliance with the laws of India is mandatory. 

3. Power of Attorney: 

If you have to be absent at the time of the transaction then you can employ someone in India as your Power of Attorney (PoA). The latter is equally able to manage all legal issues on your behalf. Ms. as far as the constructions of the PoA, the article pointed out that one should ensure that it is done by a legal practitioner so that there may not be any problem. 

Steps to Purchase Property

Therefore, let us understand how a foreign national can buy a property in India. Here’s a step-by-step guide to purchase of property by NRI in India: 

1. Research the Market: 

First of all, it is necessary to study the potential of the property market in the area where further investment will be made. Some of the factors may include the strategic location, value of property, status of infrastructure, and possible rental returns. 

2. Legal and Financial Consultation: 

It is recommended to talk to lawyers and financial advisors in order to comprehend the existing restrictions and taxation under the law. A local lawyer can be of sign service when it comes to this and more importantly; he or she will be keen to make sure all papers and documents are well prepared. 

3. Financing Your Purchase: 

NRIs can repay their property through NRE (Non-Resident External) account or through NRO (Non-Resident Ordinary) account. It is recommended to refer to the specific banks for the requirement of the loan and the further information regarding the interest rates for NRIs. 

4. Verification of Property Documents: 

Regarding the property, the title deed should be clean and free from any legal charges. Confirm various approvals and clearances from the local authorities to ensure that the program complies with the set guidelines. 

5. Purchase Agreement: 

If P2 chooses a property P1, then a purchase agreement will be prepared. This document includes the commercial conditions of selling and buying, payment plan, and many others. This is why it is advisable to read it carefully before affixing your signature to it. 

6. Registration: 

The transfer of the property deeds also known as the property transaction must be reported to the sub-registrar’s office in the particular area. Stamp duty and other fees are paid while registering the business. 

7. Post-Purchase Formalities: 

Once you have paid for the property , there are several procedures that you will have to go through such as the transfer of utilities, tax registrations and see to it that the name in the records of the property is only yours. 

Tax Implications and Repatriation

Understanding the tax implications of property ownership and the repatriation process is essential:Understanding the tax implications of property ownership and the repatriation process is essential: 

1. Income Tax: 

In India rental income from property also attracts income tax. Indian income tax is applicable to all forms of income and thus one is required to declare renting income and pay taxes on such income by filing his or her income tax return. 

2. Capital Gains Tax:

If you wish to sell the property, then capital gain tax will be charged. There is a general tax rate on the gains which depends with the holding period of the asset and whether or not it will be categorized as short term or long term capital assets.

3. Repatriation: 

NRIs cannot sell property directly to residents here because the Indian laws state that NRIs can transfer the earnings only to their native country with some limitations decided by the RBI. It is recommended that you be familiar with these rules in order to avoid hitches being experienced on the process of repatriation. 

Challenges and Tips

While the process of buying property in India can be rewarding, there are challenges to be aware of:While the process of buying property in India can be rewarding, there are challenges to be aware of: 

1. Bureaucratic Hurdles: 

After having provided an insight into and fully analyzed the Indian bureaucratic structure it can be stated that the navigation through the system is not easy. It is recommended to work with reliable local experts and advisors possessing the legal competence in the field. 

2. Currency Fluctuations:

Exchange rates of the currency can affect your investment. It is advised that if a company is exposed to price risks in trading it is advised it seeks help from financial personnel on how to effectively deal with such currency risks. 

3. Maintenance and Management: 

However, property management may turn out to be difficult if you’re not based in India. Handling of day to day affairs such as repairing, security can also be solved through hiring a property management company. 

4. Due Diligence: 

One should always dedicate their time to researching any product they wish to buy. Some of the guidelines include; Confirming the authenticity of the developers, looking for hidden costs and legal requirements. 

Conclusion

Ever since liberalization in India investment in properties is one of the most beneficial opportunities for an NRI but it needs to be planned properly. Thus, familiarity with the legislation, adherence to the procedures, and cooperation with legal advisors will allow for wise choices and using all the available advantages of property ownership in the home country. 

If you are planning to invest in Indian property here is what you need to know. What are your basic goals you successfully provide – is it for investment or usage in your house or you have a different purpose? What problem have you experienced or expect to experience in this process? Please feel free to comment and contribute as you go through this interesting process! 

Frequently Asked Questions: