Tips for overseas Indians to invest in Indian real estates

Coming back home

If you are an overseas Indian who would want to have properties or real estate in India, there are some basic rules you need to adhere in order to make a good real estate investment in India.

The property prices have been significantly maintained at a good range over the past couple of years in India. However for an overseas Indian, there is only a marginal increase corresponding to the depreciation in Indian rupee against the US dollar.  This is the reason why India’s real estate sector is made more affordable and extremely money-making for the overseas investors in the recent times.

 

Ground checks

Firstly one needs to analyze the nature of the property. According to the Reserve Bank of India (RBI), a NRI is not eligible to purchase plantation land, agricultural land or farm land anywhere in the country.
Next is to examine all the legal documents before the purchase of land. This is important because there are cases where a residential project is being built over an agricultural land without getting approval from the government. In such cases, the investment will be declared illegal, irrespective of whoever owns the land.
Exit options

Before making any real estate investments, the NRI need to keep in mind about the EXIT strategies. When it comes to selling the property, an overseas Indian needs to face certain restrictions. However a NRI is eligible to sell residential and commercial properties to fellow Indian residents, or to persons of Indian origin who live outside India.

An NRI is only restricted to make sales proceedings on two residential properties, over or above $1 million limit in every fiscal. However out of all the profits made, only $1 million can be repatriated in every fiscal. The rest of the amount will be deposited in the NRI’s account which will remain invested in India. Again in the next fiscal, another $1 million can be repatriated.

As far as tax is concerned, if it is a long term capital gain, in case if the property is held for at least 3 years, a flat 20% tax is applicable apart from the surcharge. However if it is a short term gain, then the tax is applicable as per slab rates including surcharge.

Bottom-line being, investments in Indian real estate sectors requires a lot of planning and follow-up. One must spend some quality time on research and analysis of the current market trends and investment techniques before coming to any conclusion. Fall of Indian rupee should never be the only reason for the investment in real estate in India.

Taxation matters

In case of a built up property or a single residential unit, stamp duty is to be paid on duty during the purchase of the property. The stamp duty shall vary from state to state. It is also different in case of properties in rural areas. There are slabs of payment for stamp duty. If the new owner is a woman, then there is 4% on property value. It is 5% if it is a jointly owned by a man and woman, and 6% for men. A registration fee of 1% is mandatory for all property transactions.

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