NRIs earn millions of dollars in their heydays. But prudence lies in investing a substantial part for golden years. Historical evidence establishes land as the most lucrative opportunity. But there are comprehensive rules that guide the deal. Read on for a wider insight.
NRIs do pretty well in their host country. They settle abroad for good. However, back home they still have their family, farm lands, ancestral business and properties that grab their interest both emotionally and legally. With Indians being the largest community settled abroad, the need for financial planning both for building a retiring corpus and remittance purposes becomes important. Undoubtedly, a wisely chosen investment method not just allows you to park your hard earned money safely but also helps you to shoulder responsibilities back home.
India is one of the fastest growing economies in the world and offers numerous opportunities for NRI investment. Land has stood the test of time and has never let investors down. While there have been ups and downs in the real estate market, the prices of residential and commercial properties in India have witnessed a manifold increase.
But there are certain rules that guide NRIs into real estate investment in India. Here’s a comprehensive look into them:
Regulatory Framework: Every land deal, sale or purchase, has to comply with the regulations of FEMA (Foreign Exchange Management Act). Investor must attach documents including passport, work permit, valid visa, salary certificate and a permanent account number (PAN card) when proceeding for a property investment.
Investment Type: An NRI can invest in both residential and commercial properties with no upper ceiling limit as to how many can be owned in a name. The property can include land, under construction or ready-to-move-in apartments and offices. However, other than inherited or gifted properties, an NRI cannot invest in agricultural land, plantations and fame houses.
Competent Authority: The deal proceedings can be completed in-person or through a competent authority that has the power of attorney (POA) in his/her name. In case of an under-construction property, a power of attorney in the name of the builder or a trusted local associate is required.
Tax Implications: An NRI can claim similar tax exemptions just like an Indian resident. Although there are no taxes applicable on holding properties, upon sale the commensurate short-term or long-term capital gain taxes apply. Rental income, if any, from the property will be taxable.
Finance and Funding: All real estate investments are done in Indian currency. NRIs can also resort to bank funding from any authorised Indian bank under the NRI Home Loan Scheme. Funding of a maximum of 80% of the property value is available against the property with a repayment period of 5-15 years. The transaction is facilitated through NRE, NRO or FCNR (Foreign Currency Non Resident) bank accounts.
Besides real estate there are several other NRI investment options available. Bank deposits and fixed deposits, bonds and debentures, equity market, mutual funds and gold are amongst the most preferred. Investors may choose an investment vehicle on the basis of their risk appetite. Take note of the tax implications, repatriation schemes and market risk exposure before investing.