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 they've
been gifted or inherited. It should be kept in mind that the monetary
transactions, used in these investments should be strictly in Indian National
Rupees (INR), through proper channel.
Funding the Purchase: It is advised to get the papers
verified by a lawyer before going ahead with the transactions. One should
properly 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, should 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
NRI's 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 relative's 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.
Regulations on Sale of Property by NRIs: Under the
FEMA rules, if you are an NRI, you can sell any residential or commercial
property you have bought or inherited to anyone you want. If you have any
inherited agricultural property, plantation or farm house, you have to search
for a resident Indian to buy it. However, you are allowed to gift them to
another NRI or the person of Indian origin. There are some specific RBI
guidelines on the repatriation of sale proceeds which need to be adhered to.
You need to decide on whether you want money as repatriateble or not. "If
you want to repatriate, it needs to come in foreign currency from an overseas
account, NRE or FCNR account. One can repatriate up to the amount invested in
the property," says Rego. "The other condition is that repatriation
cannot exceed the foreign exchange amount paid for purchase of property through
banking channels. Refund of application money, bayana, advance on cancellation
has no limitations," says Sudhir Kaushik, co-founder and CFO of Taxspanner Also, it must be noted that an NRI cannot repatriate proceeds of more than two
properties.
Tax implications :A property is also a good tax saving
tool for both residents and non-residents. The benefits for a non-residential
Indian (NRI) are very similar to the tax benefits of a resident Indian. An NRI
is entitled to all tax benefits related to purchase of property that a resident Indian is. So, you can claim a Rs 1 lakh deduction under 80C.
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