Real estate investment has the potential to generate higher returns by both capital appreciation and rental yields. When it comes to investing in real estate, people have an array of options to choose from apartments to luxurious villas and so on. Such opportunities are not just restricted to the Indian residents but also Non-Indian Residents (NRIs) as well, as per the Foreign Exchange Management Act (FEMA) rules.
An NRI property investment in India are of 3 kinds:
• Commercial properties
• Residential properties
• Villas/bunglows
However, they cannot invest in agricultural land, unless inherited by the ancestors. NRIs investing in Indian properties is not an easy task, owing to the lack of proximity.
To make NRI property investment in India a hassle-free procedure, one should keep the following tips in mind:
1) Purpose of investment: Before investing in any property, the NRI should understand their risk appetite and spend with a clear purpose. If the ultimate goal is all about returns, they can get it by purchasing flats in developed areas and then renting them. The second bit is a retirement home. In such scenarios, NRIs can look for flats in Thane, which is a developing area.
2) Developers credibility: It is imperative for the NRI to do a thorough check of the track record that the chosen builder holds. Mere research would not be sufficient. The record should include past delays in project implementation, and history of complying with the RERA laws that indicates the reputation of the builder.
3) Enquire about home loan: In India, housing loan involves lengthy documentation process. However, it is not the same when it comes to NRI property investment in India. Some banks offer pre-approved credit for certain developers, especially those who have held a decent track record previously. This ensures the investment is worth every penny and fulfils an NRI’s dream of acquiring their dream home.
4) Understanding taxes: NRIs should have proper knowledge of the tax implications in India at the time of investment such as rental taxes and property taxes. Experts recommend NRIs to remain invested in the property for at least 3 years to avoid short-term capital gain tax.
5) Verification of legal documents: It is advisable that the NRI checks the legality of the asset. The NRI should be informed of the current owner, its history, legal disputes if any, and local regulatory approvals. Ensure the home adheres to all legal aspects before signing the deal.
6) Location: One of the crucial aspects while investing in India is the locality. Be it short-term or long-term investment, developed or developing area, they should have basic amenities in a place like proper infrastructure, hospitals, educational institutes, connectivity, shopping centres, etc.
For NRI property investment in India, one should hire a Power of Attorney who can overlook the process in the NRI’s absence. One could also hire a good property manager or broker for better clarity.