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Investing in property in India has been made fairly simple for NRIs
It's hard to quite define it. The attachment one has for one's motherland. A
number of people who've left Indian shores for greener pastures abroad still
feel a yearning to maintain links with the land of their birth... Or the land to
which their ancestors belonged.
So deep is the affection one has for his or her sarzameen (the most
precious land), that even though a number of Indians have settled abroad, most
of them have still hung on to that property in the village, city or small town
they dream of returning to one day.
A professor of Economics at one of California's premier educational institutes,
Ranjeev had remained virtually cut of from India for 23 years. Busy studying for
his Ph D, a student with hardly any money who later landed a teaching job, he
had focused solely or survival in and alien land. "I met my wife, a Frenchwoman,
in the US, and god knows when I became a part of that country," Ranjeev says.
India slowly disappeared from his list of priorities, a dim memory recalled only
when his parents visited him once in a rare while.
It was only after the death of his father that, Ranjeev, returning to India for
the last rites, was confronted with a problem. It was related to the property
he, the sole heir, had inherited: A flat in a posh New Delhi locality, where his
widower father had lived alone. Sale of the property was a feasible option. No
permission was required from the Reserve Bank of India (RBI) if an outright sale
of the property was made. The bigger of the problems, however, was the original
investment in the flat, which had been made in Indian Rupees. This prevented
Ranjeev from repatriating the money abroad. Also, hefty capital gains tax
applicable to the profits from the property sale made him baulk a bit. Not
wanting to cut off links with India totally, he also considered leasing out the
property. There were problems here too. Taxes were also applicable to the
amount, and since it was in Indian currency, the money could not be remitted
abroad. Finally, Ranjeev had to admit defeat, sell off the property and keep the
money in India for future investments.
DOES AN NRI HAVE A PROBLEM ACQUIRING PROPERTY?
While NRIs like Ranjeev have had their share of troubles disposing of property,
acquiring of the same is fairly simple for NRIs.
- An NRI who holds an Indian passport can buy any kind residential or commercial
immovable property in any place in India without necessarily notifying the RBI
or asking for permission from any government agency.
- It can be purchased by remittances from abroad through normal banking channels
or out of Non-Resident (External) [NR (E)] Account and/or Non-Resident
(Ordinary) [NR (O)] account and Foreign Currency (Non-Resident) [FCNR] account.
- Permission for acquisition, transfer or disposal by way of gift of immovable
property - which is not a farmhouse or agricultural land or plantations property
- is not required by NRIs of Indian nationality. In case he or she wants to
acquire commercial property for any industrial, commercial or trading activity
by his proprietary/partnership firm in India, a declaration on form IPI 7 has to
be filed with the RBI within 90 days from the date of purchase.
Rules of purchase are slightly different for NRIs holding foreign passports.
- Property purchased will be solely for their bona fide residential use.
- Property can be purchased by remittances from abroad through normal banking
channels or out of NRE/FCNR account.
- Income from renting out of property purchased or inherited will not be
repatriated abroad even if purchase money came from NRE/FCNR account.
- It is mandatory for foreign citizens of Indian origin to declare such property
to the RBI within 90 days from the date of purchase in the prescribed IPI 7 to
the Chief General Manager, Exchange Control Department, Foreign Investment
Division, Central Office Department, Foreign Investment Division, Central
Office, RBI Mumbai.
CAN AN NRI TAKE A LOAN TO PURCHASE PROPERTY?
The good news is, yes, an NRI can take a loan for buying property, a plot,
constructing a new home, or extending/improving an existing home, as per certain
RBI guidelines, provided:
The loan amount shall not exceed 85% of the cost of the dwelling unit. Own
contribution, which is the cost of dwelling unit financed less the loan amount,
can be met from direct remittances from abroad only through normal banking
channels, the NRE/NRO account and/or Non-Resident Special Rupee account [NRSR]
in India. Repayment of the loan, comprising the principal and interest,
including all the charges are to be remitted from abroad only through normal
banking channels, the NRE/NRO account and/or Non-Resident Special Rupee account
[NRSR] in India.
Documents to be submitted with the loan application form include:
- Photocopy of the labour contract duly countersigned by the applicant's employer
(translated to English for non-English documents).
- Latest salary certificate (in English) specifying the following: Name (as
appearing the passport). Date of joining. Passport Number. Designation.
Perquisites and salary.
- Photocopy of labour card/identity card.
- Photocopy of valid resident visa stamped on the passport.
- Photocopy of monthly statement of local bank account.
- Property-related documents.
Security to be provided by the NRI for a housing loan
The first option is mortgage of the property through deposit of title deeds or
other collateral security as required.
If the property is under construction, collateral or interim security could be
in the form of assignment of life insurance policies, surrender value of which
is at least equal to the loan amount, pledge of shares and such other
investments.
Last but not the least, it is advisable for an NRI to give Power of Attorney to
a person he trusts, for acting on his behalf when he is not able to visit India.
The Power of Attorney should be executed as per drafts provided by the housing
finance company and given to a person residing in India.
It is very important for an NRI to scrutinize each and every minute detail of
the documents he or she has to handle while purchasing property. It is easy to
spend a fortune on property, but to avoid fraud and cheating, one should contact
authorized sources for the purchases. All legal documents should be shown to a
lawyer for verification and authentication. It is a vast process, but when that
precious bit of property has been acquired, it would all have been worth it!
You can send us your query now on
query@nrilegalservices.com or click on
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