An NRIs guide to investing in property in India. With the rupee falling, real estate has been one lucrative investment option for non-residential Indians (NRIs). Also, whether the market is hot or not, many NRIs like to have a place back here in India. The RBIs regulations on it are fairly easy as well and you do not have to take any prior permission from the authorities. The rules for any such property transaction fall under the Foreign Exchange Management Act (FEMA). An NRI or Person of Indian Origin (PIO) can own both residential as well as commercial properties in India and there is no restriction on the number of properties you can buy. However, you cannot purchase any agricultural land, farm house and plantation property. You can have ownership of such property only if theyve been gifted or inherited. Also, the monetary transaction must be in Indian rupees (INR) and through normal banking channels using an NRI account. Funding the Purchase: Lenders will be more than happy to fund your purchase provided you are eligible and the property papers are clean. It will be wise to get the papers verified by a lawyer before going ahead. Make sure to check the title papers of the property, especially if it is inherited or jointly held, and take a bank release in case it was at any point of time under mortgage. Also, take a no dues certificate from the seller at the time of purchase to ensure there is no water, electricity or any other pending bills with the authorities. For new constructions, land title should be clear and the builder should have taken all approvals and permits from the civic authorities in terms of construction. Also, education qualification and profession play a role in deciding your loan eligibility. Like, only graduate NRIs can avail home loans in India. According to RBI norms, a maximum of 80% of the value of property can be funded by a financial institution. Rest has to come from the NRIs personal resources. Indian financial institutions give rupee loans and so the same needs to be repaid in rupees only. Another option NRIs can use is to get funding overseas where interest rates are lower and is a good idea especially if you are still overseas and have income accruing there, says Anil Rego, CEO and Founder, Right Horizons, a Bangalore-based financial planning firm. Since all transactions must happen through the banking channel, repayment has to be done by inward remittances. You can directly get the money remitted from NRO/NRE account in India or issue post-dated cheques or Electronic Clearance Service (ECS) from your NRE, NRO or Foreign Currency Non Resident (FCNR) account. In case you let out the property you can use the rent to repay the loan as well. Cheques issued from a relatives local account can also be used to make the loan payments. Passing the PoA: If you are buying an under-construction property, your developer may ask for a power of attorney (PoA) favouring them. This is not unusual and would make documentation work slightly easier and quicker. A PoA can be given to execute any contracts, deeds as well as mortgage, lease or even sell. So make sure the kind of authority you are giving to the person through the PoA. Just get it worded properly by a professional lawyer you trust. Also, if and when you want to dispose the property, it is a good idea to have a PoA to be a resident India who may be able to act on your behalf to complete formalities such as registration, possession, execution of agreement of sale, etc.
Posted on: Fri, 31 Jan 2014 17:53:55 +0000
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