If you are an NRI (non-resident Indian) and planning to invest in property in India, time could not have been better for you to do so. While India’s real estate market has seen a price correction in the recent past, buying property in India has also become more fruitful with favourable currency rates.
What are the primary requirements for an NRI/PIO to invest in a property in India?
1. It is mandatory that an NRI should possess an Indian passport to invest in a property in India. However, an NRI does not need to seek permission from the RBI to invest, transfer, dispose or be gifted with a property.
2. An NRI holding a foreign passport can also buy, transfer, dispose or inherit a property in India provided he/she uses it only for residential use. He/she should also choose a suitable mode of payment, agree to the non-repatriation of the income or funds from the property and report to the RBI within the 90 days from purchase.
3. With RBIs relaxed norms, an NRI can invest or acquire a gift of any number of immovable residential and commercial properties in India. He/ she can also purchase plots of land, pre-launch properties, ready for possession properties and under-construction properties.
4. An NRI can neither invest in nor acquire agricultural land, farmhouse or a plantation land as a gift. However, if an NRI/PIO has purchased an agricultural land before he/she was an NRI, he/she can sell the agricultural plot only to a person living in India, an Indian citizen.
5. Apart from investing in property or being gifted with immovable property, an NRI can inherit, transfer or gift an immovable estate to a resident Indian or another NRI.
6. An NRI/PIO should meet all the requirements and conditions by both FEMA and the Income Tax Act, 1961 before acquiring a property.
7. An NRI must possess all the essential documents such as a Permanent Account Number (PAN Card), valid Indian passport, OCI/PIO card, passport size photographs, address proof and notarized power of attorney (POA) to someone in India. It is necessary that a copy of a power of attorney is notarized with the Indian consulate of the country to grant authenticity to it.
8. If an NRI purchases a property through his/her NRE bank account, he/she can repatriate the sale proceeds and also rent income to the preferred foreign bank account once the Income Tax and the capital gains are deducted. NRIs must remember that repatriation for sale proceeds for residential property is restricted to only two properties.
9. Citizens of Bangladesh, Sri Lanka, Afghanistan, Pakistan, China, Iran, Bhutan or Nepal cannot transfer or acquire an immovable property (other than on lease not exceeding 5 years) without the earlier permission of the Reserve Bank.
Important points an NRI should consider before invest in property in India:
1. An NRI should review all the property documents including a registered title of property that can be obtained from the local sub-registrar’s office.
2. Seek legal vetting for all the land and property documents and make sure to have a clear title of property.
3. Ensure that the property name is free from issues with appropriate rights by the seller to sell away the property.
4. Ensure that there are no outstanding debts on the property and thus get a no dues certificate from the seller before purchasing the property.
5. Get a bank release letter from the concerned bank in case the estate has been mortgaged as a security for home loan.
6. Check whether the property has all approvals and permissions from the civic authorities for construction purposes or not.
7. Acquire a non- encumbrance certificate for the past 30 years to make sure that no mortgage has been pending on the property to be purchased. This will also allow the buyer to ensure that the title belongs to the rightful property owner who wants to sell it.
8. Obtain imperative clearance under the Urban Land (Ceiling and Regulation) Act, 1976.
9. In the matter of sale by a third party namely, real estate promoter, check whether he is the absolute property owner or holds a registered power of attorney (POA) to sell the property. It is better to get from an established developer with an unblemished record.
10. Seek property assistance from a registered valuer to ensure price quoted is the correct market value.