Money Matters: Thinking Of Property Investment? Here Are 6 Must-Know Tips For NRIs

Investing in property is often considered a wise financial decision, offering stability, potential appreciation, and a tangible asset. For Non-Resident Indians (NRIs), purchasing property in their home country can be an attractive prospect, whether for residential purposes, investment, or as a retirement plan. Under the Foreign Exchange Management Act (FEMA), Indian citizens living abroad are now permitted to invest in real estate within India. However, navigating the real estate market from abroad requires careful consideration of various factors to ensure a smooth and successful transaction. Here are some necessary aspects that NRIs should keep in mind before buying property:

1. Understand Legal Requirements

NRIs must familiarise themselves with the legal framework governing property ownership in India. The Reserve Bank of India (RBI) has specific guidelines and regulations concerning property investments by NRIs. NRIs have the freedom to purchase various types of properties in India, excluding agricultural land, farmhouses, and plantation properties. Acquisition of agricultural land or farm houses requires approval from the Indian government and the Reserve Bank of India (RBI).

2. Verify Property Title and Documentation

Before finalising any property deal, conduct a thorough verification of the property title and relevant documentation. Ensure that the seller has clear and marketable title to the property, free from any encumbrances or disputes. Review documents such as sale deeds, property tax receipts, possession certificates, and land records to validate ownership.

3. Transactions

All investment transactions must be conducted in Indian currency, utilising either an NRE (Non-Resident Rupee) or NRO (Non-Resident Ordinary Rupee) account from an Indian bank, or through an FCNR (Foreign Currency Non-Resident) deposit account to mitigate foreign exchange fluctuations. Home loans can be pursued if funds are insufficient, with repayment obligations being fulfilled in Indian currency through the designated bank accounts

4. Tax Implications

Be aware of the tax implications associated with property ownership and investment in India. When NRIs sell a property in India, they are subject to Tax Deducted at Source (TDS) at a rate of 20.6%. Short-term capital gains are taxed at 30.9%, a rate comparable to that of residents in India. However, NRIs eligible for lower tax brackets can claim refunds for excess TDS deducted.

Consult with a tax advisor or financial expert to understand your tax obligations and optimise your investment strategy.

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5. Power of Attorney

NRIs living abroad have the option to grant power of attorney to friends or relatives residing in India to facilitate property transactions. This allows the chosen representative to handle the purchasing process on their behalf. NRIs can opt for either general or specific powers of attorney, enabling their representative to act as needed within the scope of these rights.

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6. Seek Professional Advice

Stay updated on market trends, regulatory changes, and economic developments that may impact your property investment. Seek advice from legal experts, financial advisors, and industry professionals with experience in NRI property transactions.

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