NRI guide for real estate investment in India

The real estate market in India is growing fast and it has become a lucrative sector of investment over the years. The market has surpassed the mark of $150 billion by the end the year 2018 and it is expected to touch $1 trillion within the next decade.

These statistics are encouraging for real estate investment in India at the first place. But, the Indian government has passed the Benami Bill and Real Estate Regulatory Act recently, which have made this very market in India look more attractive. These acts have made investment in the sector for the foreign Indians and the Non Resident Indians (NRI) pretty much easy and profitable.

Now that, these acts have made it easier for the NRIs to invest, let’s have a look at some essential things to remember for them. Usually the NRIs buy land in India for investment purpose. With issues like project delay, land crisis, price hike, NRIs sometimes find it difficult to approach. Still, the acts mentioned above have made the situation more transparent.

Well placed real estate investment can bring big amount of money; Image Source: forbes.com

With a permanent account number, any non-resident Indian can invest in property sector. But, that’s not everything. Before pouring money in properties, one needs to keep in mind some specific things mentioned below.

Essential findings

No matter whichever sector you are going to invest your money in, you must conduct research on that field and bring some important findings to evaluate the future. As an NRI, one might not be familiar with the Indian market and other factors. So, one needs to go for some specific findings which would help him to understand the situation.

First of all, it is necessary to find out property trading history of the area. An easy way to do this can be going to the banks and local property management organizations. Also, the overall infrastructural condition of the area has to be assessed. An area with good infrastructural condition is highly likely to shine in real estate market. Transportation is the first condition in this case. If an area doesn’t have good transportation system, no matter how good the infrastructure is, the area won’t be doing well in the market.

The last finding one need to collect is legal issues. If an area has too much legal issues and disputes, it is better not to invest there.

Choosing wisely

NRIs often face a common issue while investing in property in India. The issue is buying lands that are not supposed to be sold to them. For instance, a NRI can’t buy a farmhouse, agricultural land or a plantation land. Buying these types of lands might cause legal issues.

Choose according to growth potential; Image Source: dundalkdemocrat.ie

All the real estate terms and rules are governed by the Foreign Exchange Management Act or FEMA. So, it is better to learn the rules first. One can also determine the state of the land whether it is for residential purpose or investment. In this case, FEMA can be of great assist for one.

Avoiding extra charge

NRIs often take assistance from local brokers and bear heavy additional charge. Proper financial planning could save this additional expenditure. As all the transactions are done with Indian rupee, there are many brokerage firms and assistance available for currency exchange in property trade.

But, those might prove very expensive. Better option is opening a NRE account with an authorized Indian bank, through which all the currency exchange trade can be completed. With NRE account, one can utilize the money directly coming from abroad to India without any tax. Besides, one can raise fund up to 80% of the total amount needed for investment through requisite funds.

Power of attorney

If you are not residing in India and want to buy a property there while you can’t be present physically, you can bring in a Power of Attorney or POA. Once you’ve brought a POA, the POA will be legally responsible for taking all the necessary actions regarded to your property.

POA will look after your real estate business; Image Source: forbes.com

Tax

As the Income Tax act 1961 is active, a NRI can claim up to 1 lakh rupee tax deduction. This act is a great opportunity for the NRIs to gain some tax benefits. If they sell their property after 3 or more years, the transaction will be considered as long-term capital gain and the owner will be able to claim tax reduction on that. So, it is wiser to invest in long-term basis for the NRIs.

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