6 must-knows for NRIs before investing in Indian real estate

For a Non-Resident Indian (NRI) seeking to make an investment in property in India, one of the most important requirements is to understand the financial landscape. The financial environment in the country is a very important enabler in investments, and it is both a constantly relevant and dynamic factor. If you are an NRI or know anyone who is looking to invest in property in India, here are a few things you could do well to keep in mind when you start planning.

Regulatory Act:
The good news is that the rules of the Reserve Bank of India are very simple and easy to understand. You do not require any prior permission from the authorities to make an investment in property in India. There are rules guiding transactions of this sort under the ambit of the Foreign Exchange Management Act (FEMA).

Allowed types of properties:
Strictly speaking, an NRI or a Person of Indian Origin (PIO) can own both residential and commercial properties in India. There is no restriction on the number of properties that can be invested in. However, an NRI cannot purchase any agricultural land, farm house and plantation property. They can own such property only if it is inherited or gifted to the NRI.

Transactions:
All monetary transactions must be in Indian rupees (INR) and through normal banking channels using an NRI account.

Funding the purchase:
To fund your purchase as an NRI, one of the things you should keep in mind is that lenders are open to fund purchases as long as the paperwork is clean. Have all your papers verified by a lawyer before going ahead. If the property is inherited or jointly held, make sure that you clear the title, and ensure that you take a bank release if it was ever under a mortgage, and take a no-dues certificate from the seller if it is bought. Ensure that there are no pending bills with any of the authorities – be it water, electricity or other similar dues.

If you are funding your property investment with the help of a financial institution, remember that according to the RBI, a maximum of 80% of the value of property can be funded by a financial institution. The remaining has to come from your own sources. All transactions should take place through the banking channels, so make sure to use inward remittances and have them remitted inward 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.

Power of attorney:
If you are buying property that is under construction, you may have to give your developer or a trusted associate a power of attorney. Make sure that you have a lawyer’s help to word it appropriately, so that your hassles are reduced while the property is being constructed.

Tax benefits:
Purchasing property from outside India enables you to a tax benefit that is on par with the tax benefits that residents gain. An NRI is entitled to all the tax benefits that accrue from the purchase of property that a resident Indian is entitled to. You can claim aRs 1 lakh deduction under Section 80C of the Income Tax Act, 1961.

As an NRI, your dream of having a home to go back to in India is understandable. With the government working to make this process easier, there are hardly any obstacles in the way of making your dream home a reality.