Non Residential Indians or NRIs are one of the important investors who lend their support in country’s development. Be it Laxmi Nivas Mittal or Lord Khalid Hameed, everyone has supported India with full of heart so as to make it one of the developed nations in the world. As esteemed investors, they should have given privilege and proper guidance for their investment. Here at Property Frames, we have a team of well experienced real estate professionals who understand the perception of NRIs and their unique approach towards investment, thus helping them out with a complete solution. Moreover, our team is trained on RBI laws as well as other legal aspects that administer the rules and regulation for NRIs buying property in India. They bring along considerable knowledge of consulting NRI customers on real estate investment in India. Our service is dependable, transparent and hassle free which ensures that the money you are willing to invest would be in safe hands

We at The India Estates always look forward to give our NRI fraternity a chance to experience security and comfort of their home but we have to communicate to them, the steps involved in buying a property in chennai. To begin with, we need to understand the definition of Non-Resident Indian. Since property purchases are governed by FEMA, we need to go by the definition of NRI as stated in FEMA. According to FEMA, an NRI is a citizen of India who is resident outside India.

Who is a Non-Resident Indian (NRI)?

Ans: An Indian Citizen who stays abroad for employment/carrying on business or vocation outside India or stays abroad under circumstances indicating an intention for an uncertain duration of stay abroad is a non-resident. (Person Posted in U.N organizations and official deputed abroad by Central/State Governments and Public Sector undertakings on temporary assignments are also treated as non-temporary assignments are also treated as non-residents). Non-resident foreign citizens of Indian Origin are treated on par with non resident Indian citizen (NRIs).

Who is a person of Indian Origin (PIO)?

Ans: A Person of Indian Origin (PIO) is a citizen of any other country but whose ancestors were Indian nationals at least four generations away.

What is an OCB?

Ans: Overseas Corporate Bodies (OCBs) are bodies predominantly owned by individuals of Indian nationality or origin resident outside India and include overseas companies, partnership firms, societies and other corporate bodies which are owned, directly or indirectly, to the extent of at least 60% by individuals of Indian nationality or origin resident outside India as also overseas trusts in which at least 60% of the beneficial interest is irrevocably held by such persons. Such ownership interest should be actually held by them and not in the capacity as nominees. The various facilities granted to NRIs are also available with certain exceptions to OCBs as long as the ownership/beneficial interest held in them by NRIs continues to be at least 60%

Can a NRI buy property in India?

Ans: Yes, an NRI can buy a house in Chennai or a commercial building in Chennai. Further, there is no limit on the number of residential or commercial properties that an NRI can purchase in India. There are exceptions to that clause. An NRI however cannot buy agricultural, plantation land or a farm house in India and he cannot acquire such property as a compliment. There are however no restrictions on inheriting such property.

Can a NRI buy property in India?

Ans: Yes, an NRI can buy a house in Chennai or a commercial building in Chennai. Further, there is no limit on the number of residential or commercial properties that an NRI can purchase in India. There are exceptions to that clause. An NRI however cannot buy agricultural, plantation land or a farm house in India and he cannot acquire such property as a compliment. There are however no restrictions on inheriting such property.

Do you need Reserve Bank of India (RBI) permission?

Ans: No, RBI permission is not required to buy residential or commercial property.

What are the modes of funding?

Ans: Payment for the purchase of property can be made either by way of funds remitted to India from abroad or through regular banking channels or through the balance in the NRE, NRO or FCNR Account.

Is income tax applicable on housing properties in India?

Ans: According to the Indian Income Tax Act, if a person (resident or NRI) owns more than one house property, only one of them will be deemed as self-occupied. There will be no income tax on a self-occupied property. The other one, whether you rent it out or not, will be deemed to be given on rent. If you have not given the second property on rent, you will have to calculate deemed rental income on the second property (based on certain valuations prescribed by the income tax rules) and pay the tax thereof and if you have inherited a property in India and that is not your only property, you would have to pay tax on deemed income.

Do you need Reserve Bank of India (RBI) permission?

Ans: No, RBI permission is not required to buy residential or commercial property.

Is deemed income from house property taxed in a foreign country?

Ans: You would need to look at the tax code in your country of residence. In the case of NRIs in the United States, the US tax code does not tax deemed income. Always consult a tax expert as passive activity rules are quite cumbersome.

Will I be able to avail home loans?

Ans: Yes, the RBI allows NRIs to take home loans for buying property in India. You can also take a loan for repairs and renovations of your home. You can pay EMI’s in any one of the following ways:

What tax benefits am I eligible for when I repay home loans?

Ans: Under section 24 of the Income Tax Act, the interest on home loan is deductible from the income from house property to the extent of Rs. 1.5 lakh per annum. Further, up to Rs. 1 lakh of principle repayment can be deducted under section 80C (subject to an overall limit of Rs. 1 lakh of that section). This interest can be deducted from rental income. In case of self-occupied property discussed earlier, your rental income will be zero but you can still claim a deduction of interest of up to Rs. 1.5 lakh. In such a case, you would have a loss from house property. The loss can be set off against income from other sources like interest income, capital gains etc. If the loss is not completely exhausted in a particular year, it can be carried forward for 8 years. That is, you can show the loss in your tax returns for the next 8 years and off-set it against other income. But once carried forward, the loss can be set off only against income from house property.

Can an NRI give power of attorney for property purchase transactions?

Ans: Yes, in fact experts recommend that you give a PoA to a person residing in India so that he or she may complete formalities such as registration, possession, execution of agreement of sale etc. A PoA can be given to execute all contracts, deeds, mortgages, lease, sell and all matters relating to managing the property. However, at any given time, it would be better to give a specific power of attorney to any person, restricted only to a single action such as only purchase or only for lease. The power of attorney should be executed on a stamp paper or as per the requirement of the country where the PoA is executed. You must then get the PoA attested by any authorized official of the Indian Embassy/Consulate/Trade commissioner in that country.

Is there a limit to the number of investment in acquiring commercial properties in India?

Ans:

Can foreign citizen of Indian Origin acquire or dispose of residential property by way of gift?

Ans: Yes. Reserve Bank has granted general permission to foreign citizen of Indian Origin to acquire or dispose of properties up to two houses by way of gift from or to a relative who may be an Indian Citizen or a person of Indian origin whether resident in India or not, subject to compliance with applicable tax laws.

Can immovable property held in India, be transferred by way of gift to relatives/registered charitable trusts/organizations in India?

Ans: Yes. General permission has been granted by Reserve Bank to non-resident persons (foreign citizen) of Indian Origin to transfer by way of gift immovable property held by them in India to relatives and charitable trust/organizations subject to the conditions that the provisions of any other law, including Foreign Contribution (Regulation) Act, 1976, as applicable, are duly complied with.

Can foreign citizen of Indian Origin acquire commercial properties in India?

Ans: Yes, Under the general permission granted by Reserve Bank properties other than agricultural land/farm house/plantation property can be acquired by foreign citizen of Indian Origin provided the purchase consideration is met either out of inward remittance in foreign exchange through normal banking channels or out of funds from the purchaser’s NRE/FCNR accounts maintained with banks in India and a declaration is submitted to the Central Office of Reserve Bank in Form IPI 7 within a period of 90 days from the date of purchase of the property/final payment of purchase consideration.

Can they dispose of such property?

Ans: Yes.

Can sale proceeds of such property be remitted out of India?

Ans: Yes, Repatriation of original investment in respect of properties purchased by foreign citizen of Indian Origin on or after 26th May 1993 will be allowed to be remitted up to the consideration amount originally remitted from abroad provided the property is sold after a period of three years from the date of the final purchase deed or from the date of payment of final installment of consideration amount, whichever is later. Application for the purpose is acquired to be made to the Central Office of Reserve Bank within 90 days of the sales of property in Form IPI 8.

Can the properties (residential/commercial) be given on rent if not required for immediate use?

Ans: Yes, Reserve Bank has granted general permission for letting out any immovable property in India. The rental income or proceeds of any investment of such income are eligible for repatriation.

Can NRIs obtain loans for acquisition of house/flat for residential purpose from authorized dealers/financial institutions providing housing finance?

Ans: Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC, LIC Housing Finance Ltd., etc., and authorized dealers to grant housing loans to non-resident Indian nationals for acquisition of a house/flat for self-occupation subject to certain conditions. The purpose of the loan, margin money and the quantum of loan will be at par with those applicable to housing loans to residents. Repayment of loan should be made within a period not exceeding 15 years out of inward remittance or out of funds held in the investor’s NRE/FCNR/NRO accounts.

Can Indian companies grant loans to their NRI staff?

Ans: Reserve Bank permits Indian Firms/Companies to grant housing loans to their employees deputed abroad and holding Indian passports subject to certain conditions.

While purchasing real estate most developers demand a Power of Attorney in their favor, is there a way to avoid it?

Ans: One can choose not to grant the Power of Attorney (POA) to the developers. However this will mandate the mailing of all documents to your foreign residence and associated time delays. A good compromise is to grant the POA to the builder only for specific necessary items. If you are an NRI or a Property Buyer/Investor you need to understand your Investment Horizons in Real Estate pretty well. Term of Investment – This is important as you need to hold on for at least 1 to 3 Years for a decent capital appreciation and if you sell your property within 3 years you are in for a short term capital gains which is at par with the Income Tax rules of nearly 30 to 35% as applicable. It is better to stay invested for 3 years and then plan the next investments with Capital Gains etc.

What are the options available for obtaining guarantors while applying for a HDFC/LIC loan?

Ans: One will need a guarantor for a loan mainly for collateral security. The guarantor will have to demonstrate appropriate net worth to cover for the loan. Usually one can have a guarantor in any city where the loan issuer has a branch. Talk to loan issuers they will work something out for NRIs and foreign banks.

What are the criteria regarding avail of home loans for NRIs in India?

Ans: According to Reserve Bank guidelines for NRIs The loan amount shall not exceed 85% of the cost of the dwelling unit. Own contribution, which is the cost of dwelling unit financed less the loan amount, can be met from direct remittances from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India. Repayment of the loan, comprising of the principal and interest including all the charges are to be remitted from abroad only through normal banking channels, your Non-Resident (External) [NR (E)] Account and /or Non-Resident (Ordinary) [NR (O)] account and /or Non-Resident Special Rupee account [NRSR] in India.

Can an NRI give a Power of Attorney to a person in India for completion of loan formalities on their behalf?

Ans: Yes, We very well understand that as an NRI you have a different set of needs with respect to your real estate management and investment requirements and we also understand that it needs special set of services to cater to your requirements. The good news from India is that government has allowed 60% repatriation for NRIs. Reserve Bank has granted general permission to certain financial institutions providing housing finance e.g. HDFC,LIC Housing Finance Ltd.,etc. to grant housing loans to non-resident Indian nationals for acquisition of houses/flats for self-occupation subject to certain conditions.

How much loan can one get?

Ans: You can get a Home Loan of up to 85% of the Total Consideration Value

What are the conditions if the power of attorney is being executed outside India?

Ans: The attorney should preferably be a resident of India. The power of attorney should be executed on a stamp paper/plain paper as the case may be as applicable in the country in which the power of attorney is executed. Any authorized official of the Indian Embassy/Consulate/Trade commissioner in the country where the expectants resides should attest the signature of the expectants. The attorney’s signature should be verified in India by Notary Public or his employer or his banker on a separate piece of paper, which should be submitted to SHFL together with the power of attorney

Are foreign citizens of India eligible to acquire commercial properties in India?

Ans: Yes, they are, but under the general permission granted by the Reserve Bank, which are subject to further terms and conditions. A commercial property includes properties other than agricultural land/farm house/plantation property.

By living abroad you have worked very hard, saved up all your money, and are now looking for a good investment opportunity in your home country. Whatever the reason might be, may be you are moving back to India to live with your family and friends, may be you are just looking for a good investment, India has got all potential and hence it stands in the forefront of the world’s economy. Taking a plunge into the real estate of India demands high considerations before you buy a property because the list of people cheated by fraudulent developers is very big. On the contrast there are also people who have seen great success in this market with over 95x appreciation in just couple of years. This article is focused on to help you know the real estate in India better and make you one among the successful people.

Under Section 29 of the Foreign Exchange Regulation Act 1973, RBI has granted General Permission to Non-resident Indians holding Foreign Passport (i.e. Foreign Citizens of Indian Origin) to acquire, hold, transfer or dispose off by way of sale or inheritance immovable properties situated in India provided:

Foreign citizens of Indian origin are however required to declare the properties to RBI within a period of 90 days from the date of purchase in Form IPI 17. The following documents must be submitted along with the declaration.

Where a Foreign Citizen of Indian origin wishes to acquire a property, out of funds held in NRO Account then the permission from RBI will be required which can be applied for in Form IPI 1.

Where a Foreign Citizen of Indian origin wishes to acquire a property from the sale proceeds of another property, prior permission of RBI is essential and may be obtained by applying in Form IPI1.

Any number of properties can be acquired by non-resident Indians regardless of whether they are holding Indian passport provided they are required for bona fide residential purposes.

Before choosing to buy a property, get to know the purpose of the purchase. Are you buying a property in India to live with your family or you buying a property for your parents back home or is it just purely for investment purpose? Determine the purpose first as your decision will directly affect on where to choose and which developer to choose. Next determine your budget. When it comes to the price of the property there are many things to consider, it is not just the base sale price. Reputed builders come with extra charges including preferential location charge (PLC), external development charge (EDC), infrastructure development charge (IDC), parking charges, club membership fees, maintenance charges, etc. In addition to all this there are some charges which has to be considered before the possession of the property including stamp duty charges, registration charges, legal fees, brokerage fees (if applicable), yearly taxes and more.

Next is the crucial step where you will have to decide the city or region where you want your house to be. In case if you are looking to buy a home in Chennai also consider the regions in and around Chennai including Thiruvallur, Kanchipuram because there is a huge choice of new developments in these regions. Check whether the region you have chosen has got a good infrastructure including connectivity to road, rail and air, good growth rate and employment opportunities and also on the quality of life the place will provide. In case if you want to go for future rentals or resale your house or above all the appreciation value the location of the house will play a major role.

When you choose the builder, do a complete research on the builder including the builders’ reputation in the market, ease of transaction, on time delivery of the project, quality of construction and delivery of the promises made including amenities, security and other facilities. If you are going for a home loan then make sure the bank is approving loans for the particular builder. There are some builders who do homes with modern amenities so depending on your budget you can choose the builder. Finally just make sure your builder prices are not very high when compared to the market price.

The most advantageous fact in buying a property in India is you can buy a property in India without even leaving your country of residence. You are allowed to appoint power of attorney to someone in India and they can sign the papers at the time of property possession and registration.

The booking amount for the property is just between 6 to 15% of the base sale price and it can be done through wire transfer or INR from any established NRE/NRO accounts maintained with banks in India. There are also some developers who provide the option of paying the amount in USD check thus eliminating an additional step for many NRI buyers. There are two plans for payment, down payment plan and linked plan. In the down payment plan buyers pay 85% of the total sale price in a very short span of time usually within 30-60 days of booking and they pay the remaining amount of 5% at closing. In this payment the buyer is given a substantial discount as a means of incentive to pre pay. In the linked plan the payments are made in installments during different stages of construction. For example if the hand over period is three years then the installment payments are done every 2-3 months. In this type of payment the capital is not blocked due to delays in construction.

If you are going for a bank loan you have many banks offering home loans for NRIs including Citi, State Bank of India, ICICI, Kotak, HDFC and more. There is a good credit history system in the country and the average time the bank takes for approval of bank loan is same as the time taken for a US -based mortgage. The borrower should be able to pay 30% of the cost of the property by himself/herself and the term amount does not exceed 15 years. Initially the rate is quite low as 8% but eventually after a year the rates can rise to 9.75%.

It is not necessary to submit your PIO/OCI card at the time of purchase; it is more than enough if you can just establish your NRI status. The card is mandatory only at the time of the sale and during repatriation of funds. NRIs can obtain up to two houses by way of gift from an Indian citizen or a person of Indian origin whether resident in India or not, provided gift tax has to be paid.

Repatriation of funds from the rental income and eventual sale of the property is the final step involved in buying a property in India while being abroad. At present NRIs are allowed to repatriate up to $1million per person each year. In case if you don’t have a PIO/ICO card, you can apply through Indian embassy and it can be obtained in 7 days. Capital gain taxes are applicable at the time of sale, and are considered long-term after 36 months of ownership, ending up in a significant tax break. It is to be noted that if the tax is paid to India then the income is not subject to tax in the residence country with proof of payment. Rental income must be credited to an NRO account, maintained by an Indian Bank. HSBC, Citi and others.

Ask your property developer if they have property management arm to assist you after possession of the property. The property management company will manage everything including security, maintenance, rental agreements to quality tenants, and the resale of the home in your absence in your home country.