Did you know that the NRI investment in Indian real estate has doubled in value from $ 5 billion in 2014 to $ 10.2 billion in 2018? Now, if that does not speak volumes about the reach and progression of our real estate industry, then we do not know what does. The fact that today, nearly 63% of NRIs prefer to invest in real estate over any other form of investment, is a testament to the effects of change in policies, the introduction of regulations like RERA, reduction of GST and the fact that developers are more sensitive to the needs in the market.
So, if you are an NRI and investing in real estate is on the horizon, here are the things you need to check or go through, to do the same-
Check your eligibility- As an NRI, your real estate transactions fall under the purview of FEMA (Foreign Exchange Management Act) and here are the two most prominent rules. Firstly, an NRI is not allowed to invest in agricultural land or a piece of land bought for farming purposes. Secondly, if you are a citizen of Pakistan, Bangladesh, Nepal, Sri Lanka, Iran, Bhutan, Afghanistan, China; you shall have to seek special permission from the Reserve Bank
The NRO and NRE drill- When operating with Indian companies, you would need an Indian bank account. An NRE (Non-resident External Account) is used to remit money internationally, whereas an NRO (Non-resident Ordinary Account) is required to manage the income earned within India. You will need these accounts to get started and initiate any kind of transactions with the real estate developers.
Loan eligibility- An NRI, much like an Indian citizen, is eligible to loan out 80% of the investment cost. But if you plan to pay the loan EMIs using your income abroad, then you must take into consideration the foreign exchange rate and its effects on your loan payback. Also, you might need an Indian co-applicant compulsorily and hence; it is better to check with the bank you are planning to approach.
The taxes applicable- Firstly, if you are buying an Indian property for the purposes of rent, you would have to pay income tax and file for income tax returns. Short-term capital gain (STCG) is the tax payable on the profit you earn if you sell the property within 2 years of buying it. As per the applicable slab, you will be liable to pay the tax. Long-term capital gain (LTCG) is applicable when the property is help for more than 2 years and is taxed at 20%.
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